Different Types of Cryptocurrency Exchanges in 2020 that you should know!

Types of Cryptocurrency Exchanges

Cryptocurrencies have been the hot talk in the finance town for recent years. So cryptocurrency had a great entry in the world of finance and technologies. Also, acted as an alternative for traditional currency. In earlier times, crypto enthusiasts used the bitcoin mining process to reap more profits. But later on, they showed their interest in starting a crypto exchange.

Crypto exchange has also become a trendy and hot topic in most of the platforms. As for now, there are many crypto exchanges in the crypto marketplace. There are more than 500+ exchange platforms. Also, that number is growing as each day passes. All these crypto exchanges are very different from their features and user-interface. some of them are regulatory-compliant. while some of them are completely decentralized and can’t be regulated. Also, that kind of exchange is operated autonomously.

In this blog, let us see a simple overview of crypto exchange. Also, we will see different types of crypto exchanges that are available in the marketplaces in 2020. so you can understand what type of crypto exchange that suits your business needs.

Overview of Cryptocurrency Exchange

Crypto exchange is the finest place to trade virtual cryptocurrencies in a hassle-free manner. Here crypto users can buy and sell digital assets and digital currencies in a secure way. The cryptocurrency exchange owner will list the major crypto coins for trading. Such as ethereum, bitcoin, ripple, litecoins, and the list goes on. This is more like the stock market exchange where all the companies are listed as shares for trading. So users can trade their desired cryptocurrencies through any popular cryptocurrency exchange.

We can also say that crypto exchange is the best online business for startups and entrepreneurs to kickstart. Because here the exchange owner can charge fees for every transaction, withdrawal, and deposit. Also, they can earn more profits by integrating the IEO module. In crypto exchange platforms, users can perform the trade in two ways. Such as fiat to crypto or crypto to crypto trading. Presently, there are some prominent exchanges in the crypto domain. Such as binance, coinbase, LocalBitcoins, Kraken, paxful, remitano, and more. So many crypto enthusiasts are actively involved in starting a cryptocurrency exchange because of its highest profits. You can also start one such cryptocurrency exchange by using our authentic bitcoin exchange script.

Ok, now let us dive into the main discussion. Read continuously without a pause.

Classification of Cryptocurrency Exchange Platforms

Currently, three different types of crypto exchanges are ruling the crypto marketplace. They are

  • Centralized cryptocurrency exchange (CEX)
  • Decentralized cryptocurrency exchange (DEX)
  • Hybrid cryptocurrency exchange

Now, let us see each type of crypto exchange with its pros and cons

Centralized Cryptocurrency Exchange

CEX is a traditional exchange. Trading through centralized exchange involves a middle-man to complete the trade. This type of crypto exchange is completely governed by any company or central organization. CEX provides two ways of trading to all global crypto users. Such as crypto to crypto trading or fiat to crypto trading. In this exchange, there will be a mediator for trading the virtual crypto coins. Here the exchange owner will have full control over the securities and functionalities of the exchange. Also, they will monitor the user’s crypto wallet and transaction history. Recent surveys say that traditional crypto exchanges are more in the marketplace compared to other types of exchanges.

In a centralized crypto exchange, there are three types of exchange. Such as user to admin exchange, order book exchange, and ads-based exchange.

User to admin exchange

It is a kind of centralized exchange and there will be an admin for crypto transactions. Here only Admin will have all the control over the securities of a particular exchange. For every successful transaction, the admin will collect some amount of fees from the users. So in this user to admin exchange, if transactions are not completed properly. Then the admin will check, rectify it, and send funds back to the users. For instance, coinbase and coinmama is a user to admin exchange. So here users can buy and sell cryptos only by the admin of the exchange.

Order book exchange

The orders book exchange is one kind of centralized exchange that has a live order book system. If you are planning to launch an order book exchange. Then your users can instantly buy and sell cryptos using the order book system. For instance, binance, bittrex, and poloniex have an order book system in their exchange platform.

Ads-based exchange

Centralized crypto exchanges manage some of the trades centrally in an order book system. Whereas ads-based exchanges facilitate trades only between individuals. Here users can create an advertisement listing of how much cryptos they would like to buy or sell. So other users can respond and negotiate terms and payment methods with them directly. Once the negotiations are done, the two users can proceed with the transfer. They can proceed either in person, online via bank transfers, wires, or any other methods.

Individuals selling crypto can often use this exchange as an escrow service. Ads-based crypto exchanges can be either custodial or non-custodial. For instance, LocalBitcoins, paxful, and remitano are the popular ads-based crypto exchanges in the marketplace.

Benefits of centralized crypto exchange (CEX)

  • high trading volume compared to DEX
  • High functionalities
  • Offers high liquidity
  • Allows fiat to crypto trading
  • Allows crypto to crypto trading

Cons of centralized crypto exchange (CEX)

  • It is more vulnerable to cyber-attacks compared to other crypto exchange types.
  • Users can not have control over their funds
  • Centrally governed by third parties or any other mediators
  • Slow withdrawal because sometimes it takes more than a week to complete.
  • Under government regulations. So it can be shut down at any time.

Decentralized Cryptocurrency Exchange (DEX)

Decentralized Exchange is contrary to the traditional exchange. Here, decentralized exchange cuts off the intervention of the middle-man. Instead of that, it replaces the embedded lines of code called Smart Contract. The decentralized exchange is shortly known as DEX. This kind of crypto exchange does not depend on any centralized services or organization. DEX is similar to P2P exchanges but there are some minor changes between them. In DEX, there will be no admin to monitor your transactions. So here the transactions are completely done by the automated process without the presence of an admin or a mediator.

In DEX, buyers and sellers can directly connect with each other and make a deal. Most of the DEX platforms are operated using the ethereum blockchain networks. So this kind of exchange can provide services through smart contracts. If you are having the plan to start a DEX platform. Then you can enhance the high-level essential security features that can safeguard from cyber attacks.

Benefits of Decentralized crypto exchange

  • The possibility of cyber attacks and fraudulent activities is less in DEX compared to centralized crypto exchanges
  • Hacking is not possible because it is totally protected with the secured blockchain.
  • Eliminates the intermediates, admins, and other third parties in this exchange platform
  • Any central authority or government can not shut down the exchange
  • No central company can control the user funds
  • Crypto traders can have control over their funds.

Cons of Decentralized crypto exchange

  • Trading volume is low compared to CEX
  • For every action, even paying or canceling the order you need to pay a fee.
  • Very Low liquidity
  • If you did anything wrong during the transaction then you might lose your funds. Because it is completely written in smart contracts.
  • Limited functionalities

Hybrid Cryptocurrency exchange

The hybrid crypto exchange is a combo of both the centralized exchange and DEX. This kind of crypto exchange eliminates the drawbacks of both CEX and DEX. For example, it can match orders of its users and update their balances after the submission of transactions in the blockchain. Else, it can provide tightened security features that equal the security systems of DEX. so user funds could be very safe and secure in their crypto wallets. It also comes with a secured trading platform where users can buy and sell major cryptos instantly.

Benefits of hybrid crypto exchange

  • Transactions are simple, fast, and transparent.
  • User funds are completely stored in a cold wallet. So their funds will be safe and protect from cyber attacks.
  • Two-factor authentication feature will be available for all the users in a hybrid exchange
  • This kind of crypto exchanges can not be easily hacked
  • High liquidity
  • It overcomes and avoids the drawbacks of traditional crypto CEX and DEX.
  • The architecture used in the hybrid exchange is highly scalable.
  • Users can have control over their funds and have all security systems to safeguard user’s funds.

These are the types of crypto exchange platforms that are available in the crypto marketplaces. You can choose any of these types to start your crypto exchange business. But choosing the best and professional crypto exchange software provider is more essential. One such professional crypto solutions provider in the industry is Coinsclone.

Why choose Coinsclone for starting a Crypto Exchange Business?

Coinsclone, a leading bitcoin exchange software provider in the crypto domain. We have years of experience in providing top-notch crypto solutions with perfect outcomes. We excel in offering the premium bitcoin exchange software with an attractive UI and cutting-edge features. Also, we have a dedicated team for providing 24/7 effective technical and customer support to all our global clients through the internet. If you are planning to start a bitcoin trading platform. Then use our first-quality bitcoin exchange software which helps you to launch your own crypto exchange within a few days at an affordable price.

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