The buy and sell of cryptocurrencies often take place in crypto exchanges: a privately owned platform that enables seamless crypto trade. The exchange platforms provide you with a wide range of cryptocurrencies to choose from and necessary trading tools to buy and sell these crypto assets. There are many Cryptocurrency Exchange available in the US, including centralized and decentralized exchanges, however, it is important to choose a trusted and reliable platform to make a safe and smooth trade. In this article, we’ll get you all the information about crypto exchanges including their features, types, and more.
Understanding Cryptocurrency Exchange
Cryptocurrency exchanges are trading platforms where traders can buy and sell cryptocurrencies of their choice. Exchange platforms facilitate crypto trade by utilizing advanced trading tools and robust security features, protecting investor information and assets. To take part in a crypto trade through exchanges a user must have a verified account in that exchange platform. The transactions processed through crypto exchanges are not free of cost, a certain amount of fee known as a transaction fee is remitted for each successful transaction. A user has to check transaction fees, security features, availability of cryptocurrencies, and integration of advanced trading tools before choosing an exchange platform.
How Does Cryptocurrency Exchange Works?
Crypto exchanges facilitate the buy, sell, and trade of cryptocurrencies and other digital assets. By creating an account in an exchange platform investors can buy an asset of their choice that is listed in the exchange. To make a trade, your account must have the necessary funds, which can be transferred from a bank or personal wallet. Once the account is funded, a market order is placed; a request to buy or sell crypto at the current market price. A limit order helps users to specify the amount of crypto they want to buy or sell. The exchange order matching engine matches the buy order with the sell order to process trade. The transaction fees are debited and the crypto gets transferred to your exchange wallet account.
Different Types of Cryptocurrency Exchanges
Crypto exchanges are broadly classified into two: Centralized exchanges and Decentralized exchanges. As the name suggests, centralized exchanges are controlled and monitored by a central authority while a decentralized exchange enables peer-to-peer transactions, eliminating the involvement of intermediaries. Let us deeply understand what a centralized and decentralized exchange is.
1. Centralized Exchanges
Centralized exchanges are traditional forms of crypto exchanges operated by a central authority, often private companies, using an order book system. They hold custody of the funds including the private keys, necessitating the need to have trust in the platform. The users won’t have complete control over their assets and the platform is responsible for keeping the user’s funds secure.
Advantages and Limitations of Centralized Exchanges
Advantages | Limitations |
User friendly | Lack of ownership |
High liquidity | High transaction fees |
Advanced trading tools | Intermediaries involved |
High security | Lack of transparency |
2. Decentralized Exchanges
Decentralized exchanges are crypto exchanges that enable peer-to-peer transactions directly from their personal wallet. It eliminates the need for intermediaries and gives users complete ownership of their assets. Decentralized exchanges promote smart contract-assisted transactions, by which transactions are automatically executed when predetermined conditions are met. Rather than the exchanges, the users are responsible for keeping their funds secure.
Advantages and Limitations of Decentralized Exchanges
Advantages | Limitations |
Complete control over assets | Less user friendly |
Enhanced privacy and transparency | Low liquidity |
Smart contract-assisted trade | Lacks regulation |
No intermediaries | Congestion in transaction |
How to Buy Cryptocurrency through Exchange?
Crypto exchanges are the most convenient platform to buy and sell cryptocurrencies. Crypto exchanges support a large number of cryptocurrencies and users can make a trade of their choice. Below are the basic steps to buy cryptocurrency from an exchange platform.
Step 1: Choose a Crypto exchange platform
Before you select a crypto exchange, look for its security features, trading tools, transaction fees, and supported cryptocurrencies.
Step 2: Create an account
A user has to create an account in exchange for buying a crypto. You can sign up for the account by completing the necessary information including name, email address, area of residence, etc. Keep a strong password to secure your account.
Step 3: Verify the account
Trading is only possible after verification. The verification process includes KYC verification where you need to submit an identity proof.
Step 4: Link a payment option
Link your crypto exchange account with your bank account to transfer funds for buying crypto. You can also utilize a crypto wallet for this purpose.
Step 5: Place the order
You can choose an order type to buy the crypto from market order, limit order, or stop loss order. The crypto gets transferred to your crypto exchange wallet after the transaction is processed.
Step 5: Store crypto
The transferred cryptocurrency can be stored in the exchange wallet for easy transactions or can be moved to your personal custodial wallet. Personal wallets are more secure than exchange wallets.
Popular Cryptocurrency Exchange
There are many crypto exchanges available, where you can make a trade of your favorite cryptocurrency. However, it is important to choose a reliable and established crypto exchange for making a trade, so that there are fewer chances for risks and volatility. Below we list out some popular exchanges where you can make a safe trade.
1. Coinbase
Coinbase is one of the largest and established crypto exchange platforms. The platform offers a user-friendly interface where beginners and experienced traders can make a seamless trade. It has listed a large number of cryptocurrencies, giving users a wider collection to choose from. Advanced trading tools and high security make Coinbase one of the most used exchange platforms in the world.
2. Kraken
Kraken is a professional exchange platform that is mostly suitable for experienced traders. The low transaction cost, advanced trading options, and high security make Kraken one of the best exchange platforms for professional traders.
3. Gemini
Gemini is known for its robust security protocols. The platform provides a user-friendly interface where everyone can buy and sell cryptos of their choice. High liquidity is another advantage of this exchange.
Final Thoughts
Crypto exchanges are one of the most convenient and secure platforms for buying and selling cryptocurrencies. These platforms create a safe and user-friendly interface where traders can purchase crypto assets easily. Decentralized exchanges and centralized exchanges are the two types of crypto exchanges and they have both merits and limitations, and users can select one out of their comfort.
It is important to analyze the transaction fees, security measures, trading tools, crypto availability, and other features before selecting a crypto exchange. Though the platform indulges robust security features and anti-theft measures, one can’t guarantee that they are free from cyber attacks and money laundering. Crypto markets are risky platforms and do your own research before making a trade.