Cryptocurrency platforms are digital forums. Where various cryptocurrencies can be traded with other digital currencies or fiat money (Fiat money can be defined as, money governed by different countries government officially like US Dollar, Euro, etc.). These Cryptocurrency exchange platforms work as a brokerage to play an intermediary role between various sellers and buyers of different digital and fiat currencies platforms can genuinely be categorized into two (2) types as mentioned below, The Impact Of COVID-19 On Cryptocurrency: What You Should Know – Act4apps.
- Centralized Cryptocurrency Exchange Platforms
- Decentralized Cryptocurrency platforms
Ce ntralized Cryptocurrency Exchanges:
Centralized Platforms works on the similar concept of regular stock exchanges. There are three steps fulfilled by three players to complete one transaction in such platforms. These three players can be categorized as a buyer (maker), the seller (taker). In this technique, Buyers or maker set a price (bid) to buy a specific currency while on the other hand, the seller (maker) also set a price to sell his/her Digital currency. Finally, the critical role of exchange starts, the software matches buyers and seller prices to find an exact match. After finding a demanding match, the transaction is completed. Different exchange platform imposes various fees to find an exact match.
Centralized cryptocurrency platforms are considered easy to use, especially for beginners. If you are interested in any digital currency trading through a centralized platforms. You have first to register yourself to any software to open an account. After fulfilling verification requirements of the exchange, your account will be opened. Now, you have to transfer funds into your account by using means provided by your digital money platform. Funds can be transferred into your account through banks, debit or credit card, pay order or through PayPal etc. It depends on your chosen your digital way. Similarly, through the same means, funds can be withdrawn by the user when needed.
Decentralized Cryptocurrency Exchanges platforms:
Decentralized cryptocurrency exchange software don’t have any central authority role in completing the transaction. Peer to peer trading of cryptocurrencies without any intermediary role can be enjoyed through decentralized exchange platforms. There are some pros and cons of using decentralized cryptocurrency platforms.
Since these platforms allow direct trading between taker and maker, so you don’t have to transfer your funds to complete a transaction. It reduces the chance of hacking, market manipulation and of course, you don’t have to pay the fee on each transaction. In direct dealing, there is also a chance to get better rates for both buyer and seller. If you are in a country that does not allow trading in digital currencies, then you may have decentralized exchanges as your only option to trade in digital currencies, as decentralized software do not require as much information as centralized to open a account.
In these platforms to complete a transaction, both buyers and sellers have to complete their roles. So, you have to trust each other. And there is always a potential of fraud as one from buyer or seller may not fulfil his/her role to complete the transaction. In decentralized, you may feel helpless in case of fraud as there is the minimum role of exchange as compared to centralized exchanges. Most of the decentralized platform are not able to maintain liquidity and trading volume; that’s why can’t keep the interest level of its users. Decentralized exchanges are the first choice for some traders but not for the beginners in our point of view.