The Best Crypto Exchanges
Exchanges play a critical role in the cryptocurrency space and provide an onramp and offramp into the cryptocurrency ecosystem. These platforms also provide us with simple, easy-to-use cryptocurrency wallets with a number of capabilities. Can you imagine if we had to interact with a node ourselves to create transactions on the blockchain? If there were no exchanges, we wouldn’t only have to interact with the raw blockchain ourselves, but we also wouldn’t have an easy way to buy and sell cryptocurrencies. In this article, we will take a look at some of the best crypto exchanges currently in the market.
Cryptocurrency exchanges can be broken up into two categories. These categories are centralized and decentralized. Let’s take a look at what each one is.
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
What is a Centralized Exchange?
A centralized exchange serves as a digital platform that facilitates the buying or selling of cryptocurrencies by mediating transactions through a third-party entity. This intermediary oversees and safeguards the assets on behalf of both the buyer and the seller, ensuring secure and efficient trades. Unlike decentralized exchanges, transactions conducted within centralized exchanges are not directly recorded on a blockchain, thus differing in their underlying architecture.
In order to engage with a centralized exchange, users are required to furnish their personal information for the purpose of verification. For corporate entities, the exchange mandates the submission of relevant corporate information to verify their accounts. As an enticement for users to share comprehensive information, centralized exchanges adopt a progressive approach, incrementing user privileges as more data is provided. This dynamic incentivizes the disclosure of additional information.
One of the appealing facets of centralized exchanges is their accessible and responsive customer support. In case of technical glitches or the need for assistance concerning user accounts, individuals can easily reach out to the platform's dedicated support team for timely resolution.
Centralized exchanges typically offer flat pairs of cryptocurrencies at stable prices, catering to a wide spectrum of users. These exchanges have gained widespread popularity within the cryptocurrency community, largely due to their convenience and ease of use. Their prevalence ensures that there's a centralized exchange tailored to accommodate the diverse preferences of cryptocurrency investors. Noteworthy among these exchanges are industry giants like Coinbase and Binance, which we'll delve into further later in this article.
Having thus examined the realm of centralized exchanges, let's now transition to unravel the essence of decentralized exchanges.
What is a Decentralized Exchange?
Within the cryptocurrency sphere, a decentralized exchange, commonly referred to as a DEX, orchestrates an innovative transactional paradigm. In this realm, the client undertakes a distinctive journey: depositing their cryptocurrency at the doorstep of the decentralized exchange. As this symbolic threshold is crossed, a transformative process is set into motion. The client receives proxy tokens, symbolic representations of the value they've brought forth. The cardinal determinant of this proxy token issuance is either a straightforward one-to-one correspondence or a more nuanced correlation influenced by the prevailing exchange rate between the deposited funds and the proxy tokens. This newfound currency, these proxy tokens, function as a gateway to engage with the exchange's blockchain, propelling a realm of transactions and interactions.
The cryptocurrency tendered at the gateway assumes a dual role as both collateral and catalyst. It serves as collateral, vouchsafing the proxy tokens' intrinsic value and ensuring the integrity of the exchange. These tokens, in turn, encapsulate the potential for transactions within the decentralized exchange's blockchain.
Once immersed in the decentralized exchange, users partake in a novel tapestry of opportunities. A pivotal facet rests in the ability to craft sell orders, thereby converting their existing tokens into a diverse array of available alternatives. This catalytic process, from order initiation to the intricate interplay of matching, finds its immutable record within the tapestry of the exchange's blockchain. The profound significance of this lies in the transparency and immutability these operations inherit from blockchain technology, showcasing a hallmark advantage of decentralized exchanges.
Following a successful exchange, wherein proxy tokens metamorphose into different forms, an intriguing chapter unfolds. With the newfound proxy tokens in hand, users possess the potential to transmute these proxies back into tangible cryptocurrencies, reaping the rewards of their strategic maneuvers within the decentralized realm.
The decentralized exchange unfurls an ecosystem where cryptocurrency deposits embark on transformative journeys, becoming both currency and conduit, orchestrating transactions within an immutable blockchain tapestry, ultimately empowering users to transmute their endeavors into realized gains.
Centralized Exchange vs Decentralized Exchange
Besides all of the transactions being stored on a decentralized exchange’s blockchain, some other differences between a centralized and decentralized exchange are the level of control that the client has on each type of platform, the risk of the platform getting hacked, and the amount of liquidity available on the exchange. There are other differences as well, but these are the main differences between decentralized and centralized exchanges.
Let’s take a brief look at the main differences between the two.
In a centralized exchange, the majority of control belongs to the exchange platform. With a decentralized exchange, the user has most of the control.
Risk of Getting Hacked
Since a decentralized exchange does not run on just a handful of company servers, the risk of a decentralized exchange getting hacked is a lot lower than that of a centralized exchange platform.
Centralized exchanges are a lot more popular than decentralized exchanges. As a result, the amount of liquidity on centralized exchanges is a lot more than on decentralized exchanges because there are a lot more people trading on a centralized exchange.
As mentioned, these are just the main differences between centralized and decentralized exchanges. Let’s now move on to what factors make up a good exchange.
Main Factors That Make Up a Good Exchange
The major metrics that can be used to determine if an exchange is good or not are the exchange’s daily trading volume, its ease of use, and the number of available cryptocurrency pairs.
Daily Trading Volume
Daily trading volume is important, especially if you’re looking to trade a fairly large amount of cryptocurrency at a time. This is because exchanges with a high daily trading volume have larger amounts of liquidity than exchanges with lower volumes. Higher liquidity is a good thing because it means that you can exchange large amounts of cryptocurrency without moving the listing price of that cryptocurrency on the exchange.
Ease of Use
Cryptocurrency is complex enough for most people, there is no need for an exchange to be complicated as well. Centralized exchanges are more user friendly than decentralized exchanges. This is because the majority of the complex work is done by the service providers in centralized exchanges, whereas a user has to do most of the dirty work on a decentralized exchange. It is recommended that cryptocurrency investors make use of centralized exchanges if they are beginners, just until they learn the ropes of cryptocurrency trading.
Available Cryptocurrency Pairs
An exchange that has a wide array of options of cryptocurrency for a client to choose from is important. This is because it contributes to the ease of use for a client when trading cryptocurrency as they won’t necessarily have to use more than one platform to get their hands on the cryptocurrency that they desire. Furthermore, having more options on a single exchange will also contribute to the exchange’s popularity, which will in turn increase its liquidity as more people will trade on a platform that has more variety than exchanges that don’t.
So, there you have it! These are the main metrics to look at when looking for the best crypto exchanges. Let’s now take a look at the top five exchanges (in our opinion).
Founded in 2017, Binance is the largest cryptocurrency exchange in terms of the daily trading volume. Binance supports trading for over 40 pairs of cryptocurrency as well as provides its clients the ability to take part in popular DeFi protocols that can generate a yield. Everything that a cryptocurrency investor needs can be found all in one place!
Similar to Binance, KuCoin is a centralized exchange platform. KuCoin is in the top ten list of cryptocurrency exchanges in terms of daily trading volume. Launched in September 2017, KuCoin has grown into one of the most popular cryptocurrency exchanges and already has over 8 million registered users across 207 countries and regions from across the globe. KuCoin also offers its users access to popular DeFi protocols and supports a large list of cryptocurrency pairs.
One of the most popular exchange platforms in the cryptocurrency space, Coinbase is a centralized exchange platform that has a good track record in the industry in terms of reputation, security, and ease of use. Coinbase also has a good selection of cryptocurrency pairs to choose from and protects their clients from scam cryptocurrencies by conducting audit reports prior to a project getting listed on their exchange.
PancakeSwap is a decentralized exchange and allows investors to swap BEP-20 tokens. These are tokens that are built on top of the Binance Smart Chain and don’t have their own blockchain. PancakeSwap is also built on top of Binance Smart Chain, which gives it a number of advantages compared to if it was built on the Ethereum blockchain.
SushiSwap is a decentralized exchange platform built on top of the Ethereum blockchain. SushiSwap incentivizes its users to contribute to the operation of the platform by locking up funds into smart contracts for a return yield. These funds are then used as the liquidity for the decentralized exchange. Decisions relating to the SushiSwap software are made by holders of its native cryptocurrency, SUSHI.
The Best Crypto Exchanges: Conclusion
A cryptocurrency exchange plays a vital role in the cryptocurrency space and lets anyone easily onramp and offramp into and out of the cryptocurrency space. Cryptocurrency exchanges can be divided into two categories: decentralized and centralized. Centralized exchanges rely on third-party providers to facilitate trades, while decentralized exchanges rely on blockchain technology and smart contracts for exchange transactions.
The main metrics to look out for when identifying the best crypto exchanges are the exchange’s daily trading volume, ease of use, and the amount of cryptocurrencies available to trade on the platform. Some of the most popular exchanges are Binance, Coinbase, KuCoin, PancakeSwap, and SushiSwap.