When it comes to trading cryptocurrencies, then we think about cryptocurrency exchanges where they can be traded upon. There are numerous popular names in this category. These include Binance, Coinbase, Kraken, Gemini, Robinhood, Poloniex, Bittrex, and some Indian-origin ones like WazirX, CoinDCX, CoinSwitch, and Bitbns. But today we are here to discuss the difference between a decentralized and a centralized exchange.
Yes, these are two major different forms of crypto trading platforms – Centralized and decentralized exchanges. Someone new to the crypto-verse must know about these before beginning their journey of trading crypto. This article would help you as a guide in knowing the difference between the two, and might also reveal which is better for whom. So let’s get started with our topic on
Decentralized exchange and centralized exchange: what’s the difference?
If a person makes a plan to trade in cryptocurrencies, then the most important thing he must do first is to find out which of the crypto trading platforms make a better choice for doing crypto investment. As there are two types of cryptocurrency exchanges, one is centralized and another one is decentralized. So do get familiar with how they work before taking a hasty step in beginning with crypto trading. This article comes as a guide in letting you know the difference between the two exchanges. First, let us begin with:
Centralized exchange
A centralized crypto exchange can be defined as a platform that depends upon the third party or intermediary account to control and confirm the safety of all transactions. With these exchanges, traders can deposit their funds into the account of a mediator for a particular period for ensuring the safety of transactions.
When it comes to a centralized exchange, then traders are supposed to submit their personal information for checking before doing transactions. And it is not just applicable to any individual but also the trading organizations must follow the suit in the submission of their corporate details for checking before they also begin their crypto trading by using any provided trading exchange.
Traders who get verified on centralized exchanges can explore the advantage of higher withdrawal quotas with customer support, mainly when they counter technical errors. Even though there is no difficulty in using a centralized exchange, still, they do have complex principles that might not be liked by some users or we can say that they might feel uneasy in sharing their personal details at the time of doing the transaction.
Decentralized exchange
Next comes a decentralized exchange that lets buying and selling digital assets (cryptocurrencies) by crypto traders with no need for any mediator. And this defines the key difference with the centralized exchange.
Contrary to the latter, there is no need for traders to deposit their funds into the account of a third party at the time of the transaction. In the case of DEX, traders can only depend upon self-custody wallets and smart contracts to do trading on exchanges.
The base of decentralized exchanges is blockchain technology. Since these exchanges let P2P trading there is no mandatory to seek permission for buying and selling crypto assets for traders. Hence, they can use escrow systems or proxy tokens.
Conclusion
In terms of popularity, centralized exchanges had the upper hand over decentralized exchanges as they were the first entrant into the market. But now DEXs have also aced up in grasping more popularity among crypto traders. They too influence the crypto exchange market. If users want to have supervision over their accounts, then it is all possible with DEXs, as they apply P2P systems.
Hence, DEXs are the more ideal choice if you seek ease of use and wallet control. Like differences in exchanges, know the difference between Cronos wallet Metamask and Cronos wallet Trust wallet.
