A cryptocurrency exchange is one of the integral parts of the entire cryptocurrency ecosystem. What are they and how do they differ from other such platforms where you can trade various assets? And above all - how to use them safely? What is a cryptocurrency exchange? Cryptocurrencies are - depending on the definition and actual use - an asset or currencies, i.e. means of payment. A cryptocurrency exchange is naturally needed to trade and exchange both tokens and cryptocurrencies. In the world of brokers and traditional investments, you can naturally buy stocks on exchanges. You can, on the other hand, purchase currencies (usually fiat currencies) at exchange offices. In the market for digital currencies, by far the most trading and exchange volume occurs on cryptocurrency exchanges, however. It is on these online platforms that you can exchange your "paper" currencies (Polish zloty, dollars, euros, etc.) for cryptocurrencies such as Bitcoin, Ethereum or e.g. Litecoin. Cryptocurrency exchanges also allow you to trade crypto, e.g. BTC for LTC, ETH for BTC, etc. depending on the number of pairs the exchange offers. Thus, cryptocurrency exchanges act as a "third party" so to speak, which enables easy and convenient exchanges in the blockchain technology space. What is obvious to a senior participant in this market, they only have a digital dimension. Today, they do not exist in physical form. If someone would like to purchase cryptocurrencies in such a way, they have to use the offer of stationary exchange offices or bitomats. Another alternative to cryptocurrency exchanges is also the online bitcoin exchange. What role does a cryptocurrency exchange play in the market? Exchanges are extremely important for any digital currency investor. Their primary role is to allow all market participants to buy and sell cryptocurrencies. The distinctive feature at this level is that they allow you to view both buy and sell offers. Thus, both the buying and selling side can observe how many bids are before they are ordered. If a trader cares about time, he can thus easily outbid other bids, obviously paying a higher price than the competition or sell cheaper than the other traders are offering. Reducing the role of cryptocurrency exchanges only to the position of an intermediary in trading, would be a shallowing of the subject and their relevance to the market as a whole. Today, thanks to the mutual rivalry of entities, such platforms offer an increasingly wide range of services concerning trade, but also, for example, access to new tokens / cryptocurrencies and also recently popular IO - a collection very similar to the standard ICO, which takes place on the exchange platform. Some of the exchanges even decide to have educational platforms through which they train their users. Thanks to such solutions, exchanges are convenient not only for advanced investors, but also help to enter the world of blockchain for people who are only recently interested in the topic. There is also a growing number of platforms that issue their own stablecoins - cryptocurrencies with a fixed exchange rate linked, for example, to the value of the US dollar. Some exchanges are also releasing their own tokens so that traders can reduce their buy/sell commissions on the exchange. Centralized or decentralized? In the above description, the concept of a so-called third party came up. Although most blockchain projects are based on the idea of decentralization, cryptocurrency exchanges still remain mostly centralized entities today. Although this is also starting to change slowly and more and more decentralized exchanges are being created as the market develops. Some centralized exchanges also decide to create their decentralized counterparts - the so-called DEX (from decentralized exchange). As of today, however, decentralized exchanges are only a form of experimentation, not a standard. The main feature that distinguishes decentralized exchanges from centralized ones is that the aforementioned "third party" does not exist in theory. Why only in theory? Well, transactions take place by pairing the relevant orders directly on the blockchain. This means that the funds are constantly stored on our wallet, to which we have a private key, which significantly increases security. In practice, we still have to pay a buying/selling commission to the exchange operator. Decentralized cryptocurrency exchanges are still a new and emerging concept and their operation is not always easy. Therefore, it is recommended that they be used by users more familiar with the cryptocurrency market. It is worth mentioning that cryptocurrency exchanges (regardless of whether they are decentralized or centralized), to this day, remain one of the safest forms of acquiring cryptocurrencies. However, it is important to remember... That, a cryptocurrency exchange is not a wallet! The crown rule of using exchanges is to keep your funds (especially in larger amounts) on them, only for as long as necessary. It is important to keep this in mind and store our cy
No comments:
Post a Comment