Cryptocurrency is the talk of the finance world currently. When cryptocurrency related discussions are carried out, then a question “how can I get it?” will be raised. You can either get cryptocurrency from mining or simply buy it from cryptocurrency exchanges. Users get confused at first about the cryptocurrency exchanges. They no need to get confused, instead, they just have to remember that there are three types of cryptocurrency exchanges viz., Centralized Exchange (CEX), Decentralized Exchange (DEX), and Traditional Cryptocurrency Exchange (TEX).
Centralized Exchange (CEX)
Centralized exchange (CEX) is actually a broker. The main purpose of CEX is to facilitate crypto trading. CEX charges fees for facilitating crypto trading. If A is a CEX, then A will decide prices of all cryptocurrencies available on its platform. The prices of the cryptocurrencies will be the sum of the market price and small premiums. If you are a buyer, then CEX will find a seller for you. If you are a seller, then CEX will find a buyer for you. Not every CEX provides fiat/crypto pairs. But most CEXs provide crypto/crypto pairs. Coinbase and Gemini are fiat/crypto centralized exchanges. While Binance and KuCoin are crypto/crypto centralized exchanges.
How it works:
- Find a crypto exchange
- Check prices of all cryptocurrencies listed on the exchange
- Choose a cryptocurrency from the exchange
- Give your fiat currency/cryptocurrency to place an order for the cryptocurrency
- You just purchased the cryptocurrency
- Find a crypto exchange
- Give your cryptocurrency to the crypto exchange
- Your cryptocurrency will be kept by the crypto exchange
- Your cryptocurrency will be sold to a buyer by the crypto exchange
- You will receive your amount for selling your cryptocurrency
Decentralized Exchange (DEX)
A decentralized exchange (DEX) is a platform connecting buyers and sellers of cryptocurrency. Buyers and sellers can do transactions with each other without the involvement of brokers in DEX. They will have full control over their cryptocurrencies. There is no role of intermediaries in DEX. Sellers will have the full right to set their own rates for their cryptocurrencies. While the role of buyers is to find sellers with the help of DEX. When a buyer finds a seller, then the buyer will be able to perform an Over-the-Counter (OTC) trading. In other ways, buyers can denote rates. When a buyer denotes a rate, then DEX will match the buyer with a seller. It is basically a peer-to-peer exchange. Crypto-crypto trades and fiat-crypto trades can be done in DEX. LocalBitcoins is an example of crypto-crypto centralized trades. While Changelly is an example of fiat-crypto decentralized trades.
Traditional Exchange (TEX)
A traditional cryptocurrency exchange (TEX) is an online platform. Customers can buy and sell cryptocurrency on the platform. Buying and selling of a cryptocurrency will be depended upon the current market price of the cryptocurrency. Fees will be charged for each transaction by TEX. Some crypto exchanges allow crypto/crypto trades while some crypto exchanges allow fiat/crypto trades. Kraken and Coinbase Pro are fiat/crypto traditional exchanges.