Should You Lean on Centralized or Decentralized Exchange?
A centralized cryptocurrency exchange can be taken advantage by traders in performing trades from cryptocurrency-to-fiat currency and vice versa. At the same time, it can be used as well in conducting trades between different cryptocurrencies. So if you are still in the notion of binance vs kucoin and which one to use with crypto trading, hope this gives you valuable information.
Inception of Decentralized Crypto Exchange
And while this appears to be covering the entire potential of the transaction type, still there’s a market for another kind of crypto exchange too. Here comes the decentralized exchange.
Decentralized exchanges are the alternative option to centralized exchanges for here, it is cutting out the middleperson in a transaction and generating what’s typically considered as a “trustless” environment. Such exchanges work as a P2P or Peer-to-Peer exchanges. The assets never go through an escrow service and all transactions are carried primarily on smart contracts.
How One Exchange is Different from the Other?
The biggest difference between a centralized and a decentralized exchange is whether a middleperson is available or not. With a decentralized exchange, it’s less popular and used than its centralized exchange counterpart. Nevertheless, there are actually more transactions done in a decentralized exchange and it is feasible that sooner or later, it will catch up with centralized exchanges.
For majority of investors for digital currency, centralized exchange is among the most significant medium for doing their transactions. These exchanges are basically online platforms that are primarily used in buying and selling cryptocurrencies. They are the channels that investors are frequently using to buy and sell crypto holdings.
There are several investors who find the idea of a centralized exchange to be a bit misleading. This is due to the reason that digital currencies itself are normally billed as decentralized.
Here Comes the Third Party
When it comes to centralized crypto exchange, the concept of centralization is referencing the utilization of a third party or middleperson to conduct the transaction. Sellers and buyers alike trust the middleperson in handling their assets. This is pretty common setup in banks where customers do trust the bank in holding and keeping their money safe.
The purpose of this setup is that, banks are offering security as well as monitoring that a person can’t do on their own. In regards to centralized crypto exchange, the same idea is applied. The clients trust not just that the exchange will complete the transactions for them safely but also, will be using the network of users in that exchange to locate trading partners.