These days, investing in the financial markets has attracted the attention of users, and many investors from all over the world have entered these financial fields.
You must know that the direct activity of traders in these global markets is not possible and investors must use the services of a broker or a digital currency exchange for this purpose.
What is taken into consideration in the meantime is choosing an authentic and reliable exchange with suitable services.
In this regard, we are dealing with two types of centralized and decentralized digital currency exchange, knowing the characteristics of each and comparing them will help you make a better choice in using cryptocurrency exchange services.
In this article we will check out together:
- Why we should choose the right digital currency exchange?
- Centralized digital currency exchange
- Decentralized digital currency exchange
- The difference between centralized and decentralized digital currency exchange
Why we should choose the right digital currency exchange?
Before introducing centralized and decentralized cryptocurrency exchange and comparing these two with each other, it is better to talk briefly about the importance of choosing an online cryptocurrency exchange.
The mechanism of financial markets has its own complexities, and if you jump into this market without knowledge and so-called recklessness, you will lose all your capital.
On the other hand, the high number of exchanges that provide trading services has caused users to have a negative performance in choosing the right exchange.
Meanwhile, the exchange’s high-quality services, security, and support for its users can give investors hope for the future, and users can trade with more confidence. To choose a digital currency exchange, you need to get to know the types of exchanges.
Centralized digital currency exchange
The definition of digital currency online exchange is clear to you. Exchanges are intermediaries between sellers and buyers and receive their income through commission fees in various transactions.
What is highly regarded in a centralized exchange is the supervision of a particular company or organization over the exchange. In fact, this type of exchange has a specific owner. As a result, it has specific rules and has high security due to strict supervision.
Centralized exchanges are older than decentralized exchanges and about 99% of transactions in financial markets are done through these platforms.
Usually, in the centralized digital currency exchange, cold wallets are used, which have physical keys, and it is not possible to hack them until profit-seeking people gain access to these keys.
Decentralized digital currency exchange
Decentralized exchanges can be considered a relatively new idea in the field of digital currencies.
Because it is not as old as centralized exchanges. In this type of exchange, no specific organization or institution supervises and users can conduct their transactions on the blockchain platform in a peer-to-peer manner.
It is better to say that users’ assets are not kept in exchange accounts. As a result, there is no need to open an account for users.
Users can do their transactions in this type of digital currency exchange without the intervention of an intermediary. Certain strictures are also applied to carry out transactions so that the possibility of mistakes in transfers is zero.
The difference between centralized and decentralized digital currency exchange
You have probably become familiar with the differences between the two exchanges so far. In examining the differences between these two types of platforms, the advantages and disadvantages of each can be explained.
Due to the mechanism and simple operation of centralized exchanges, this type of platform is more liked by users, especially beginners.
Applying different layers of protection when making transactions on a centralized exchange protects users’ assets. Meanwhile, centralized digital currency exchanges charge high fees for their services.
The commission percentage depends on the amount of the transaction. Also, due to the high volume of transactions in this exchange, the possibility of hackers infiltrating their servers increases.
In a decentralized digital currency exchange, the possibility of money laundering and the risk of property theft are reduced due to the lack of supervision by a specific organization or person.
Users in this type of exchanges do not need to authenticate and fill out registration forms. Therefore, they can hide their capital from others.
As we said, 99% of transactions in the digital currency market are done in centralized exchanges. This has caused the speed of buying and selling in decentralized exchanges to decrease due to the small volume of transactions.
In addition, these exchanges have many complications. Although users have full control over their assets. But if they forget their wallet password, they lose all their assets.
In this article, while introducing centralized and decentralized cryptocurrency exchanges, we examined the advantages and disadvantages of each of these platforms so that you can get to know the differences between these two exchanges and make the right choice.
What we have stated in this article will help you to make the right decisions to enter the cryptocurrency financial markets and perform trading activities based on your conditions.