Centralized Cryptocurrency Exchanges
It would be important to familiarize yourself with the major risks associated with cryptocurrencies and have sufficient reasons why you should invest in cryptocurrencies before you start buying cryptocurrencies for investing or trading purposes.
Although you can buy cryptocurrencies by paying cash to acquire them, such transactions are not common. The most popular way to buy cryptocurrencies for investing or trading purposes is through online “cryptocurrency exchanges” which are also known as “digital cryptocurrency exchanges” (DCEs).
Depending on your cryptocurrency investing plans, you can consider different alternative methods for purchasing cryptocurrencies; for example, if you plan to be actively involved in cryptocurrency trading, you can use a traditional cryptocurrency exchange or broker.
On the other hand, if you plan to buy cryptocurrencies and store them in your wallet instead of trading them, you can use any trusted online/local cryptocurrency exchange.
A cryptocurrency exchange or digital currency exchange is an online cryptocurrency platform that consists of any technology and service that enables people to trade or exchange (buy and sell) cryptocurrencies.
Fiat currencies (dollars, pounds, euros, pounds, yen, or any currencies that governments regard as legal tender), electronic money, and digital assets can be used to trade cryptocurrencies on cryptocurrency exchanges.
Cryptocurrency exchanges are broadly classified into centralized cryptocurrency exchanges (CEXs), decentralized cryptocurrency exchanges (DEXs), and hybrid cryptocurrency exchanges (HEXs) which are developed to solve the problems peculiar to centralized and decentralized exchanges.
This article defines centralized cryptocurrency exchanges (CEXs), states the types of activities that occur on CEXs, and concludes with a list of ten top CEXs.
Definition of centralized cryptocurrency exchanges
In the cryptocurrency world, “centralize” means that “cryptocurrency operations (buying, selling, or trading) are being monitored or controlled by a middleman or third-party”.
Centralized cryptocurrency exchanges are online cryptocurrency platforms that use third-party providers to coordinate trades between cryptocurrency buyers and sellers. On the contrary, decentralized exchanges don’t use middlemen or third parties.
Because buyers and sellers interact to trade on CEXs, and the CEXs play the role of a middleman or third party, CEXs are similar to traditional stock exchanges.
CEXs usually charge commissions when they facilitate transactions between the buyers and the sellers, provide alternatives for high liquidity, and maintain full control over cryptocurrency buyers’ and sellers’ assets which are usually stored in hot wallets, and can be easily accessed on the internet by their owners.
Possible activities on centralized cryptocurrency exchanges
1. People/clients can place their money or fiat currencies on CEXs, and the CEXs would store it for them.
2. Clients can note or observe fluctuations in the prices of the available cryptocurrencies on the CEXs.
3. Whenever clients are interested, they can use their fiat currencies (dollars, pounds, euros, pounds, yen, etc.) to buy available cryptocurrencies of their choice. Clients are even allowed to exchange or swap fiat currencies with cryptocurrencies, or swap one or more cryptocurrencies for another or other cryptocurrencies.
4. Clients can place orders for their cryptocurrencies to be bought or sold.
5. Centralized cryptocurrency exchanges look for sellers on their platform to match with buy orders, and buyers to match with sell orders. In this way, clients who are interested in selling cryptocurrencies would be merged with buy orders, and clients who are interested in buying cryptocurrencies would be merged with sell orders.
Although most CEXs allow pairings or exchanges between two different cryptocurrencies, not all of them allow pairings between fiat currencies and cryptocurrencies.
The major issue with centralized cryptocurrency exchanges
The major issue with CEXs is that they are vulnerable to attacks, and it’s always possible for them to be hacked by hackers. A number of hacking scandals have occurred in the past; this is why it’s important to find out whether a CEX is competent enough to combat hackers, and also pay clients in case their platform gets hacked in the future.
The total number of CEXs will likely continue to increase, but no two CEXs will be equal; some of them will achieve success, while others will perform averagely or fail. Therefore, if you are interested in using a CEX, look for detailed information about the available CEXs and choose the best from the best.
Examples of top centralized cryptocurrency exchanges
1. Luno: https://www.luno.com/
2. Coinbase: https://www.coinbase.com/
3. Kraken: https://www.kraken.com/
4. Bittrex: https://www.bittrex.com/
5. Robinhood: https://www.robinhood.com
6. Bitfinex: https://www.bitfinex.com
7. Gemini: https://www.gemini.com/
8. Huobi: https://www.huobi.com
9. Binance: https://www.binance.com
10. KuCoin: https://kucoin.com