A lot have happened during that last 5 years in the crypto industry. Bitcoin and Ethereum have surged a lot, regulations have increased around the bitcoin/crypto legality and this created the need for different types of Cryptocurrency exchanges. Below is a list describing and explaining the pros and cons of crypto exchanges.
What is a Centralized Crypto Exchange?
Centralized cryptocurrency exchanges are the platforms that hold the cryptocurrency (“asset”) private keys in their systems. Those types of platforms are the most common in the industry and most users trust it. Furthermore, those exchanges are “custody exchanges”, meaning that the user/customer doesn’t hold the private keys. Such exchanges allow users to trade crypto-to-crypto but also crypto-to-fiat but only for limited pairs and payment methods. A common crypto-fiat payment method is Bank Transfer, where the user can withdraw cryptocurrencies to his/her personal Bank account.
What is a Decentralized Crypto Exchange?
Decentralized exchanges, also called DEX, are the platforms that have no control over their customers private keys, so even in the event of a hack/exploit, the coins will still remain safe. Those types of exchanges are mostly common for Ethereum and ERC trading pairs, since its powered by the use of Smart contracts. DEX do not support crypto-to-fiat trades but the variety of crypto-crypto pairs is huge.
What is a Peer to Peer Exchange?
A P2P Crypto Exchange is a platform that connects people from all over the world to trade and exchange with each other, for a variety of payment methods and from anywhere in the world. Peer to Peer exchanges are well known for their usability and availability in countries under economical crisis such as Venezuela. On such exchanges, users can easily buy bitcoin with paypal with few clicks and relatively safely, since the platform acts like a safe Escrow Manager. P2P Exchanges offer also increased anonymity and privacy, since the KYC procedures are often optional.
Which Crypto Exchange type is the best ? It all depends on the users preference, when it comes to payment methods, restrictions, country limitations and trading pairs. DEX exchange seem the most secure and fast, but lack of payment methods and crypto to fiat, while Centralized ones lack the anonymity. On the other hand, p2p exchanges offer more payment methods but also have higher fees. Its up to the trader to decide which type of exchange suits best for his needs.