How Do You Know if a Crypto Exchange is Centralized or Decentralized?

People who use different types of crypto exchanges will find things they like about them.

In the Crypto Space, you have to figure out how to get around

There are about 300 million people who use cryptocurrencies, Crypto.com says, which is a lot. The number is expected to reach 1 Billion by the end of the year 2022, which is about 10% of the world’s people. While the number of people who are interested in crypto is growing, not everyone who works with crypto has a good understanding of the basics.

For example, the terms “decentralisation” and “centralization” are used to describe cryptocurrency exchanges. When an exchange is centralised or decentralised, there are certain things that make it that way. Here, we’ll take a quick look at these words to better understand them. LET’S GO IN. ‍

Exchanges for Cryptocurrency

It is important to know what a cryptocurrency exchange is before we can learn how to use one. To put it another way, a crypto exchange is a place where people can buy or sell digital currencies. Each exchange has its own rules for how it works, but they all make it easy for willing sellers of crypto to find willing buyers.

The way a crypto exchange works can make it either Centralized or Decentralized. A look at each class: ‍

Centralized Exchanges – CEX

  • These are exchanges where people who want to buy or sell crypto do so through a third party. It takes a lot of trust to trade on centralised exchanges, because traders put their money in a safe place on the platform.
  • Centralized exchanges always ask their users to set up an account with identifiable information, such as their names and email addresses, before they can use the exchange. This is called “know-your-customer,” or “KYC.”
  • Centralized exchanges are usually regulated and must follow the rules of the countries where they work.
  • The exchanges in this group don’t have to work with a single blockchain. They can help people buy and sell crypto assets from any blockchain.

Binance, Coinbase, Kucoin, Huobi, and many other well-known Centralized exchanges are examples.

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Decentralized Exchanges – DEX

Centralized exchanges are very different from this type of exchange:

  • Trades don’t need a third party to run the transaction or keep track of traders’ money. Traders keep their assets in their own wallets and only give them out when they make a trade. This is how it works:
  • It doesn’t matter what kind of ID you have before you can trade on a decentralised exchange. Anyone who has a crypto wallet can trade on DEXes without being judged by their wallet.
  • DEXes are hard to control because they don’t have a central place to do things. They don’t have to follow any rules when they work in any place.
  • There are a lot of decentralised exchanges that are built for a specific blockchain. It’s been a while since they’ve been able to support more than one chain, though not as many as a typical CEX does.

They include UniSwap, PancakeSwap, BakerySwap and so on. Decentralized exchanges like these are very well-known.

Is there a better class than the other? Not all the time. There are a lot of different things about each one that make it appealing to different people who are into crypto.

Important things to keep in mind when you’re done.

Centralized exchanges have a lot of the same things that make them different from Decentralized exchanges. The list doesn’t include all of the features that an exchange has. Instead, it shows you the most important things to look for when you’re trying to figure out what kind of exchange it is. A Centralized exchange is one that asks you to register an account with your name and email address, deposit your assets from your wallet to its wallet address before you can trade, and so on. If the exchange doesn’t ask for these things, it’s a Decentralized one.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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