Posted on Oct 28 2021 - 4:43pm by Anurag Kumar

Like every other resource in this world, cryptocurrencies are also limited in nature. Basic laws of Demand and Supply apply to all cryptocurrencies available on Internet. As the supply for any cryptocurrency goes down, its market value increases. At one point in the future, supply for cryptocurrencies will come to an end and one of the way to get hands on any cryptocurrency, would be circulating it via trading exchange platforms.

Cryptocurrency trading platform plays an important role in the circulation of cryptocurrencies among retail investors. Mining cryptocurrencies is the natural way to get any cryptocurrency whereas people who are unable to mine cryptocurrencies are using cryptocurrency trading platform. These exchanges act as an intermediary between the sellers and the buyers and exchanges earn through transactions fees and commissions. One can exchange cryptocurrency with monetary currency and vice-versa (i.e One can convert Bitcoins into monetary currency and vice-versa ). Exchange platforms provide crypto wallets to hold and exchange cryptocurrencies.

Cryptocurrency Trading Platforms

Cryptocurrency trading platforms list various cryptocurrencies on their platform and users across the world can buy or sell the cryptocurrencies listed on the platform. Let us understand the two types of Cryptocurrency trading platforms available online i.e. Centralised (CEX) and Decentralised Cryptocurrency trading platforms/exchanges (DEX).

Centralised Cryptocurrency trading platforms/exchanges (CEX)

Centralised Cryptocurrency trading platforms/exchanges (CEX) are custodial in nature. CEX Platform remains in control of the user’s private keys (in simpler language, CEX Platforms are custodian of your funds and cryptocurrency). User engages with CEX Platform to buy or sell any cryptocurrency and CEX Platform on behalf of user makes that trade [in simpler language, CEX owes user money/cryptocurrency on paper only and the asset here (cryptocurrency traded) lies with CEX Platform as an intermediary organisation; controlling user’s private keys].

CEX as an authority checks and oversees every transaction happening on its platform thus bringing security to the trades happening. CEX are more user friendly and reliable in nature but a transaction fees is charged for every trade done. CEX Platforms hold user’s Cryptocurrency on behalf of them and this in turn exposes them to cyber theft.

Below you can see live exchange screenshot from one of the CEX Platform (WazirX).

How Centralised Cryptocurrency trading platforms works

Decentralised Cryptocurrency trading platforms/exchanges (DEX)

Decentralised Cryptocurrency trading platforms/exchanges (DEX) are non custodial in nature and allows P-2-P transactions and requires no intermediary. Every user remains in control of the private keys while making a transaction on DEX Platform. DEX platforms carries out self-executing smart contracts without presence of an intermediary organisation thus giving user control of their private keys and the funds. DEX Platforms maintain anonymity but are more complex in nature as users have to remember their keys and passwords for crypto wallets and if lost can’t be recovered.

Centralised (CEX) Cryptocurrency trading platforms have been in existence from a long time and majority of the transactions are happening through these platforms whereas Decentralised Cryptocurrency trading platforms/exchanges have recently gained popularity among users as they are able to hold their private keys of the cryptocurrency traded which majorly differentiates the two types of platforms.

Recently Cryptocurrency trading platforms worldwide have gained exposure and various startups in this space are becoming Unicorns, like CoinSwitch.  Other popular platforms are Conibase, Binance, WazirX, 1k daily profit app, etc. Let us know which crypto exchange platform you are using.

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