Cryptocurrencies come in many different forms and functions and can be exchanged in online platforms called ‘crypto exchanges’.
A quick look at available crypto exchanges reveal that there are several types you can choose, each with its own set of pros and cons.
All in all, there are 5 kinds of crypto exchanges- Instant, Broker, Decentralized, Centralized and Hybrid.
Instant
An instant crypto exchange offers a quick way to convert one cryptocurrency into another. It’s not a trade per se, because you won’t be interacting with another user. The exchange is service-based, meaning you’re making a trade with the platform’s pool of crypto assets.
It’s convenient in a way that the transaction is done in real time, and you won’t have to wait for another user to complete the exchange. However, the exchange rate is understandably much higher in order to make a profit and keep the business running.
Broker
Broker exchanges offer some of the best in terms of being government compliant and secure. It’s a sort of centralized exchange where you don’t have to worry about your cryptocurrencies getting lost or stolen in a day or two.
Because broker crypto exchanges regulated users are taxed for the money they make, and only the most popular ‘coins are added to the database.
Decentralized
Decentralized crypto exchanges do not have a single entity controlling the server or transactions. Instead, it mainly works through a smart contract where tokens are exchanged.
Here, users have complete control over their assets. It also boasts an extensive list of tokens for trading, even the newest and the most obscure ones. A decentralized exchange is unlikely to be hacked as it’s powered by Blockchain technology.
Decentralized exchanges have low liquidity so you won’t be able to sell large token amounts here. Also, it will be very difficult, if not impossible to reverse a mistake due to smart contracts and the Blockchain technology.
Centralized
A centralized cryptocurrency exchange is governed and controlled by an entity. It boasts a higher security than most and has features such as site upgrades, a single centralized software and trust.
If you’re looking to trade big then a centralized platform is a clear choice. They have the largest volume and liquidity among crypto exchanges. Set up a crypto trading software, such as Crypto Robo and make the trades according to forecasts and you can gain a profit.
Centralized exchanges can also deal with fiat currency and can work out errors in transactions. You can browse through thousands of available tokens and pick the one you like. They’re also tempting targets for hacks and security breaches since they have all the tokens in one location.
Hybrid
Hybrid exchanges offer the best of both worlds. Users can get the level of security a decentralized platform has with the benefits that come with a centralized exchange.
The volume isn’t as high as the centralized ones but they’re usually good enough for casual investors and crypto enthusiasts. However, making one isn’t easy and the companies that create them will have to go through regulations.