Kataryna Kovtun April 6, 2020
What are cryptocurrency exchanges? The principle of their work.
A cryptocurrency exchange is a virtual resource that was created to exchange some cryptocurrencies for others. Some exchanges support the function of exchanging cryptocurrency for fiat money. The main condition for the exchange of cryptocurrency is the availability at the right time on the exchange of the corresponding pair.
To trade on the cryptocurrency exchange, you will have to go through the following steps:
- Registration on the exchange is a simple operation requiring the user to email or phone and password for subsequent access to the exchange;
- Depositing funds for use on the exchange. Crypto coins are credited without commission, unlike fiat funds;
- Creating an order for trading operations on the exchange. The user independently sets the price that he is willing to pay or wants to receive for a certain currency. After that, he begins to trade by placing an order on the general list.
If the optimal price is set for the currency that matches the market conditions, then there is sure to be a buyer whom it suits. In this case, the deal is concluded. If the price significantly exceeds the norm, then the buyer will be difficult to find. With the accumulation of the desired amount from transactions, each trader can withdraw cryptocurrency from the exchange or leave them in his wallet for further trading.
What types of cryptocurrency exchanges are there?
Centralized exchanges are platforms managed by companies that act as intermediaries in the trading process. In exchange for providing such a service, they charge trading fees.
Since its inception, centralized exchanges have given the audience access to BTC, ETH and other cryptocurrencies — so that they are noticed by the masses.
However, at the same time, centralized exchanges have several disadvantages, because of which they have been criticized by the crypto space:
- The probability of hacking and theft of funds. Over the past 9 years, there have been more than 30 hacks of cryptocurrency exchanges. Attempted thefts are happening all the time, as hackers are still looking for vulnerabilities in centralized exchanges.
- Government bans. Many governments legally prohibit storage, trading, mining and other cryptocurrency transactions.
- Lack of good user support. Users of centralized exchanges complain about the slow response time of support services, and their problems can be resolved in weeks.
- Lack of keys for users. Storing cryptocurrencies on centralized exchanges, you do not own them since exchanges do not give you private keys for your wallets.
Also, due to compliance with KYC rules, there is a risk of theft of personal information of users.
Examples of centralized exchanges are Bittrex, Bitfinex, Bitxmi, Coinbase, Kraken, Binance, BitMex, OKEx, Huobi, Poloniex, etc.
Decentralized exchanges (DEX) are designed so that there is no third party between people who make transactions, which means a low transaction fee. Security on decentralized exchanges is much better because such platforms do not store cryptocurrencies of users, but simply directly connect the parties. This means that there are no servers that can crack and steal private keys.
Despite its advantages, DEX is not as popular as centralized platforms. Accordingly, they have fewer customers, lower trading volumes and liquidity, since it is more difficult to find suitable deals on DEX.
Decentralized exchanges also lack such advanced trading options, such as margin trading or stop-loss, which makes them less convenient for professional traders to use.
Examples of decentralized exchanges: Altcoin.io, BarterDex, Bisq, Bancor Protocol, Cryptobridge, EtherDelta, 0x, Kyber Network, OmegaOne, OasisDex, WavesDex, etc.
Cryptocurrency Exchange Differences
All cryptocurrency exchanges work on the same principle, but their functionality may be different. They are constantly updated and improved to attract the maximum number of users.
Important parameters for them are:
- The choice of cryptocurrencies. Some exchanges offer the exchange of only the most popular ones, while others have a huge number of cryptocurrency pairs.
- Currency withdrawal availability. Some exchanges allow only Bitcoin or Litecoin and several other common currencies to be withdrawn, others have a more functional spectrum.
- The size of the commission. It is debited from the transaction. The only difference is that some charge interest only on buyers, others on both sides of the transaction.
- Ability to work with fiat money. Some exchanges specialize in concluding transactions exclusively on cryptocurrency, some allow the possibility of depositing and withdrawing fiat funds.
- Providing personal data. On some exchangers it will be enough to leave an email address, on the second, during the registration process, users carry out verification with the provision of identity documents.
- Methods of crediting and withdrawing funds. Exchanges differ in payment input options through payment systems also by bank transfer, transfer from card to card.
- Profile Security. To enter, one password may be enough or additional data verification procedures will be required — it all depends on the exchange.
- Trading Sizes. On some exchanges, the volume of trade may exceed one billion dollars per day, while on others it may not even reach $ 10 thousand.
Exchanges also offer their users additional features, including:
- the presence of detailed charts with all kinds of trading tools;
- use of referral systems;
- interest on deposit;
- accessibility of margin trading;
- the ability to work in mobile applications.
How to choose an exchange depending on the type of activity.
The criteria for the type of activity should influence the choice of an exchange for cryptocurrency.
The following criteria will be important for traders:
- the availability of detailed charts and trading tools;
- significant volumes of open transactions;
- the ability to use leverage;
- a large number of trading pairs.
For investors, the following characteristics will be important:
- accessibility of verification;
- the presence of the needed pairs;
- high reliability and the absence of failures in the withdrawal systems;
- amount of commission for operations with money;
- limitations on the size of the input amount.
For the average user, such characteristics of the exchange are valuable:
- the presence of the necessary pair;
- high speed and convenience of depositing and withdrawing funds;
- positive reviews and no negative;
- high-speed registration.
Each exchange provides its customers with useful information that may be useful in further transactions. The answer to which cryptocurrency exchange to choose will come only in a practical way with the personal use of some of them. Which one to choose for personal use is up to each user to decide.
BitXmi cryptocurrency exchange is suitable for any type of activity.
BitXmi is a relatively new cryptocurrency platform founded in 2018 in Singapore. The Bitxmi team works every day to improve security and exchange functionality. Over 100 coins for trading are provided for traders, an advanced chart, with the ability to select additional tools. An advanced chart with the ability to select additional tools is presented on the platform. Bitxmi has an excellent referral program for investors. You can earn money by storing the BXMI token — the platform’s native token. Average users will appreciate the ease of registration on BitXmi — registration and confirmation take no more than a minute. Over 144 trading pairs against USDT, BTC, ETH and ETF — you can find the desired coin for trading. Low withdrawal fees (0.025%) and trading operations (0.1%).
Go to BitXmi and see for yourself!
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