When you need to purchase, sell, or exchange cryptocurrency, you will address this need to a cryptocurrency exchange, a specialized platform that facilitates transactions with cryptocurrencies. You will also discover immediately that there are a lot of crypto-exchanges, and they all have their pros and cons. First of all, you will have to decide which exchange you are going to select for your transaction.
Decentralized Exchanges
When you exchange crypto online with LetsExchange or any other decentralized platform, you can count on several benefits that make such services incredibly attractive. The most important ones are the following:
- Mitigation of hacking risks: when you use a decentralized exchange, you don’t transfer funds to any third party but only to the recipient. There is no company involved in storing your money, therefore, there are no risks that this company can be hacked and your coins – stolen.
- No market manipulation: all transactions are performed on a peer-to-peer basis. Users` money cannot be used for fraudulent activities.
- Anonymity: many decentralized exchanges don’t require their customers to fill our KYC (know-your-client) forms and provide sensitive information.
- Beneficial crypto exchange rates: most decentralized cryptocurrencies use special tools to offer profitable exchange rates to their clients.
While decentralized exchanges offer significant benefits, they are not without drawbacks. The main cons are as follows:
- Complexity: if you use a decentralized exchange, you need to provide wallet addresses, keys, etc. to receive the exchanged funds. If you make a mistake, the money is lost.
- Transactions with fiat money might be not available: most decentralized exchanges don’t offer exchanges of fiat money to crypto-coins. It is one of the main causes why traders might want to avoid such exchanges.
Centralized Exchanges
While decentralized exchanges are very convenient, more than 90% of all transactions in cryptocurrency are performed on centralized platforms. Centralized exchanges have their pros such as:
- Convenience: you log into your account, view your account balance, and perform transactions via special applications.
- Security: centralized exchanges implement additional security layers to protect their users` accounts from hacker attacks, leaks of information, loss of funds.
Centralized exchanges have their drawbacks, too, some of them being rather significant:
- High risk of hacking: as a centralized company, such an exchange holds billions of dollars in cryptocurrency that belong to their users. This target is very attractive for hackers, and now and then, we hear that a major cryptocurrency exchange has been hacked, and the coins were stolen.
- Transaction fees: a centralized exchange charges fees for every transaction. Sometimes, the fees are high and are one of the reasons why traders prefer to use the services of a decentralized exchange.
Final Thoughts
When you are choosing an exchange to trade crypto, always consider what you get and what you lose. If you have at least the basic knowledge of how to use a cryptocurrency exchange, a decentralized platform looks like an optimal solution. But if you prefer the convenience and are ready to pay for it, your best choice might be a centralized exchange.