Despite cryptocurrency having gone mainstream even in industries offering the best online casino, it’s still a very confusing and complicated subject to understand for many crypto traders. This would include discussions concerning how they work and what types of crypto exchanges there are.
So, if you’re interested in learning about this in a detailed way, you can continue reading for more.
Understanding How Cryptocurrency Works
The type of platform that’s used to exchange cryptocurrency is the factor that will determine the way in which things will work. Most crypto trading platforms are called centralized exchanges that function similarly to a brokerage but act between buyers and sellers.
Traders on these crypto exchanges can deposit funds into their crypto exchange accounts to buy various cryptocurrency forms. This is known to be crypto-to-crypto spot trading. And in exchange for digital currencies, the platform will provide the trader with options to use to do this. This will include credit and debit card payments, money orders, bank transfers, and gift cards. Traders can expect to encounter fees whenever they wish to convert one crypto to another.
Dedicated Bitcoin and crypto exchanges will allow their customers to withdraw their crypto money and transfer it to another wallet of choice. And then exchanges that focus on other assets, like stocks, will only allow you to purchase the crypto and not transfer it out of your web wallet.
Types Of Crypto Exchanges
There are three varieties when it comes to the types of cryptocurrency exchanges available to traders. Here’s more on this.
Centralized Exchanges (CEX)
Centralized exchanges are the popular and most traditional crypto exchange types. These exchanges are owned by private companies and they offer investors a space to trade cryptocurrencies. Exchanges like these tend to have high trade volumes, more trading pairs, and liquidity.
These exchanges are often seen as a good option to consider for new crypto traders since they offer insurance, are available for customer support, and implement user-friendly interfaces.
Decentralized Exchange (DEX)
Decentralized exchanges operate with no central point of control. The servers for this kind of exchange get spread across computers that are located around the world. This means that if one computer was to get attacked, this won’t affect the network being able to still operate. This feature attracts many traders that fear losing their crypto because of a flaw in the security systems.
When a centralized exchange operates just like a broker, the decentralized exchanges will operate more like a marketplace by facilitating peer-to-peer trading and perhaps trying to have a less rigid process in registration.
Hybrid exchanges are the more modern crypto trading platforms that aim to provide traders with the best of both worlds. Here, they remain focused on overcoming limitations through greater functionality and liquidity that’s exercised in centralized exchanges.
Other commendable features to them include their boast of transaction speeds. Here, they can do this without needing to compromise the privacy of their users. But the project is still in the pipeline, therefore, it will eventually grow in the crypto market soon enough.
Understanding Crypto Exchange Fees
There are several fees that get charged on crypto exchanges and there’s hardly enough clarity on what exactly you get charged for. But there are two primary types of fees that you should be on the lookout for. These include network fees and exchange fees that act as service fees. Other fees would include:
- Trading fees: These get charged each time you make transactions and they indicate whether an order is able to provide liquidity in the market or not. This also applies to the time when you’re trying to convert currencies.
- Deposit fees: These get charged when you add money into your account using debit, credit card, or PayPal payment systems instead of doing it through a direct bank transfer.
- Withdrawal fees: These get charged when you’re withdrawing regular currency or digital currencies from your exchange account.
- Account fees: These get charged regularly on a monthly basis.