The Exchange is a platform that allows the exchange of currencies and fiat money, all this in a virtual way under the basis of supply and demand that marks the value of the market. Many exchanges also allow to operate with shares or financial securities accepted by the community that conforms it.The main objectives of the Exchange is to dynamize the cryptocurrency economy quickly, securely, from anywhere in the world and with a low commission rate compared to traditional banking. It is now possible to exchange fiat money for cryptos or vice-versa.
They were born after bitcoin went into production due to the need to trade. By mid-October the first exchange of btcoins for fiat was registered, this action led to the creation of the first Bitcoin Exchange, the well-known NewLibertyStandard. Since then, projects to deepen and develop this international exchange encompassed in the crypto world began to emerge.
However, the growth has had ups and downs because as they were developing projects were born with low security standards that unfortunately allowed the distrust in investors to suffer significant losses (at the end of the article I leave a link about big scams)
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Despite these problems, cryptocurrency exchanges grew in number and evolved in quality, security and services. Until the current point in which there are many options, with something very clear: to provide quality options to cryptocurrency traders around the world.
The Exchange are managed by wallets and can be identified to a user or not, also these wallets manage private keys that can be controlled by you or by a third party; for this simple reason there are several types of Exchange that we will mention below:
1.Centralized Custodian Exchanges:
These are those that store cryptocurrencies and not the users. This means that the Exchange of this type does not allow you to have full control of your assets, although it may seem otherwise. Since you do not manage private keys of a wallet leaving the overall control to a third party, so that each user can only have information about the balance of his own account.
Advantages
-User-friendly interfaces.
-They provide support.
-They give you a range of possibilities to transfer and receive funds in different exchanges (as long as they support it).
-Many tools for monitoring, help and knowledge.
-They provide you with a set of tools for trading, leverage, smart contracts, among others, that help you understand and avoid mistakes due to lack of knowledge.
Disadvantages.
-In case of fraud, your personal data and assets may be compromised.
-You do not have private keys or an assigned wallet to retrieve cryptocurrencies anywhere.
-You are part of the network, but you conform to the rules of use and security policies implemented on the platform.
-You must provide sensitive personal data in order to register on the platform.
Such like: Binance, Coinbase or Huobi.
2.Centralized non-custodial exchanges.
Non-custodial exchanges allow you to leverage cryptocurrencies in a simpler way, since they only request the funds agreed for the exchange at the moment, so it is not necessary to provide so much personal data.In case you want to exchange fiat currencies (pesos, dollars, euros or others) the platform will require to verify your identity.
Being platforms without custody of cryptocurrencies, the user can transfer to the Fintech what is necessary for the exchange, keeping control of their funds. Even if the Exchange is the victim of a cyber-attack, your money will remain in your wallet.
Advantages:
-User-friendly interfaces.
-Provide support.
-Less risk of losing assets in case of an attack.
-You only reveal your identity if necessary.
-You have a wallet associated to your user, so you have more control.
Disadvantages:
-In case of fraud, your personal data and assets may be compromised.
-You do not have private keys to your wallet to recover cryptocurrencies anywhere.
-You are part of the network, but you conform to the rules of use and security policies implemented on the platform.
-You do not handle private wallet keys.
Such like: ShapeShift, Changelly or Alfacash.
3.Decentralized Exchange (DEX).
DEXs are more open in terms of custody and management of cryptocurrencies. In addition to the fact that the user maintains control of their assets, the processes are automated and anonymous. the commissions they charge may be lower. They may even offer more tools to operate.However, decentralized exchange platforms are recommended to advanced users, with extensive knowledge in cryptocurrencies, because their interface is more complex and the exchanges involve only cryptocurrencies.
Advantage:
-Users own the wallets and funds.
-Privacy of your personal data.
-You already manage private keys, you can restore your assets in any exchange or wallet.
-You can manage cold wallets.
-Transaction fees are practical or completely zero and there is usually greater security, being open source easily auditable.
Disadvantage:
-Support is scarce it is necessary to specialize in the subject.
-There are many Scam of them, it is important to study them thoroughly before using them.
-There is a lot of money laundering.
Such like:
1.-Uniswap.
2.-MDEX.
3.-SushiSwap.
4.-EtherDelta.
5.-BurgerSwap.
6.-PancakeSwap.
7.-JustSwap.
8.-Bisq.
9.-OpenOcean.
10.-1inch.
11.-HoneySwap.
Recommendation
The decentralized wallet is the best option to have control of your cryptocurrency assets, I recommend you to have full control of your wallets with their respective backup, in my opinion I work in a mixed way since I have DEX wallets where I bet on the coin projects where I am in hold. On the other hand, I have a portion of my capital in centralized exchanges working on training, leverage, staking, and others. In most cases, once the trades are executed with the dividends I aim to collect, they will most likely go back to my traditional decentralized wallet.
I also recommend you work with cold wallets which I will be talking about in upcoming articles.
Biggest Thefts of Bitcoin and Cryptocurrencies - Bit2Me Academy
