Crypto Exchanges: Types And Essence of Work

Cryptocurrency exchange: rules and main criteria for choosing a platform

A crypto exchange is a digital platform where transactions with digital money (cryptocurrency) are carried out. Traders profit through trading and exchange of existing assets. Yet, before you start conducting operations with cryptocurrency, you need to familiarize yourself with what a crypto exchange is and choose a suitable platform.

What to look for when choosing an exchange

It is best for a novice trader to get started on large platforms. After all, the larger a crypto exchange is, the more reliable it is. Also, it is worth paying attention to the exchange’s jurisdiction. It is preferable to choose platforms registered in developed countries with stable legislation and a good judicial system.

How does a crypto exchange work

An investor applies to purchase a cryptocurrency, and the exchange reports the rate of the coin of interest. If the conditions are satisfactory, a purchase is made. It will be necessary to pay not only the cost of the coin but also the exchange fee for operations.

Centralized and decentralized exchanges

Centralized exchanges act not only as a platform for conducting transactions but also offer their clients additional educational materials and trading tools. To gain access to all types of services, the user must pass the verification process. All user assets are stored on the platform’s wallets, ensuring their safety.

Decentralized exchanges do not require registration from their users, but they also do not guarantee the safety of assets since clients’ assets are stored in their personal wallets. Such crypto exchanges are more suitable for short transactions. With a long-term investment strategy, it is better to use centralized platforms.

Exchange comparison

Before trading, it is necessary to analyze and compare several trading platforms. You should pay attention to the following points:

  • How does a crypto exchange work in the country where you live? Transactions might not work if there are any restrictions.
  • A large fee can negate all the profits. Before performing operations, it is necessary to calculate all costs carefully.
  • A high minimum entry threshold can be unaffordable for a novice trader.
  • Small withdrawal limits can also interfere with large amounts. It may not be so important initially, but if you receive a higher income, the daily limit of around $100 might be highly inconvenient.