The Basics of Crypto Exchange

Most people have heard the terms cryptocurrency and crypto exchange, but what do they actually mean? Can these impact your economic future? While these concepts may sound complicated and futuristic, when explained in basic terms, cryptocurrency and crypto exchange are quite simple to understand. 

What is Cryptocurrency?

Cryptocurrency is a form of digital currency that was invented in 2008. These funds are not managed by a central entity the way that the dollar is; cryptocurrency is managed by a peer-to-peer network that is based online. Transactions made with most forms of digital currency are recorded in blockchain format. Blockchain technology has been in existence since 2009 and has continued to expand its reach as a technology due to more people becoming engaged, building the tech within a variety of industries, and an increasing number of students wanting a deeper understanding by taking free courses or earning blockchain certificates through accredited institutions. Estimates forecast a 23X increase in the blockchain market through the rest of this decade partially due to the influx of new students and professionals into the space.

The invention of blockchain is what led to the inception of Bitcoin. Bitcoin is the most well-known form of cryptocurrency and is traded or transferred seamlessly due to the self-governing nature of all digital currencies. Looking at the trade spot is a great way to familiarize yourself with information about buying, selling, and trading crypto. 

What is a Crypto Exchange?

Any buying, selling or trading of cryptocurrency is known as a cryptocurrency exchange. There are many different crypto exchanges available, and they are all different in their benefits. If you’re looking for a good way to handle cryptocurrency, you should look at fees, security, and ease of use while also weighing which exchanges are the best for your crypto of choice. 

What Are the Types of Crypto Exchanges?

There are three types of cryptocurrency exchanges that are available to users. 

Centralized

When a crypto exchange is centralized, it means that it is generally used to buy and sell cryptocurrency. For this type of exchange, you can use cryptocurrency or traditional funds, like the dollar, to make purchases. All transactions in a centralized crypto exchange are monitored by a third party. Centralized buying and trading are often less secure than decentralized exchanging because the use of an intermediary to handle transactions means that there is a greater risk of hacking, but centralized exchanges are also both dependable and user-friendly, making them preferred by many users. 

Decentralized

Decentralized exchanges involve buying and selling crypto freely and without the use of a third party. There is a tremendous benefit in choosing a decentralized exchange, as fewer individuals involved in transactions means that there are likely to be fewer fees and a greater level of security. That said, one major con of decentralized exchanges is that traditional currency cannot be used to trade for cryptocurrency. 

Hybrid

A hybrid cryptocurrency exchange can be difficult to find, but they are known for having features of both centralized and decentralized exchanges. While decentralized exchanges are more secure, centralized exchanges are faster and more user-friendly, so creating a hybrid version is an attempt at merging the best of both worlds. 

Cryptocurrency is generally a secure alternative to fiat currency, though it is a good idea to familiarize yourself with all aspects of this alternative way to manage your money. Learn about types of crypto as well as the details about different exchanges that are available to users. The best way to be successful in this way of dealing with finances is to be as informed as possible.