We have already explained to you all there is to know about the decentralized cryptocurrency exchanges in the market. Now, you probably know that it is not the only kind of crypto exchange that you can find. Centralized cryptocurrency exchanges are the other, and more commonly used type of crypto exchanges that you will find in the crypto market today. What are centralized cryptocurrency exchanges? Let us dig deep and find out.
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If you ask a crypto insider to recommend a crypto exchange for you to use, chances are that he or she will tell you about a centralized crypto exchange, like Binance, Gemini or Kraken.
Even most of the exchange-related headlines that you find on crypto news media publications are likely to be related to about the centralized ones.
What are these exchanges? How do they work? Why are they so popular? Should we get rid of them anytime soon? There are many questions around them and it is time to find some answers.
What Are Centralized Crypto Exchanges?
Although cryptocurrencies are themselves decentralized in nature, they are frequently bought and sold over a centralized exchange owned and managed by a particular company.
These exchanges basically act like large scale banks, mediating between buyers and sellers and providing wallet services for the safe storage of cryptocurrencies.
For example, the Gemini Cryptocurrency Exchange is owned by the Winklevoss Twins and their staff manages all the transactions that occur on the exchange.
For services rendered to the buyer and the seller in a particular transaction, each centralized crypto exchange charges a transaction fee proportionate to the transaction amount.
Some notable examples of centralized crypto exchanges would include Bittrex, BitFinex, Kraken, Binance and as we have already mentioned, Gemini.
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Why Have Centralized Crypto Exchanges Become So Popular?
Centralized crypto exchanges are frequently credited for pushing up the adoption rate for most cryptocurrencies as they are easy-to-use and offer a high degree of liquidity.
For beginners, who are new to cryptocurrency trading, centralized crypto exchanges are often the most convenient route to take.
Acting like a bank, they make the process of buying and selling easier and eliminates the need to conduct a due diligence as you would sometimes need to in a peer-to-peer exchange platform.
For all these reasons, centralized crypto exchanges have become so widely used and popular in the market.
Is It Time To Get Rid of Centralized Crypto Exchanges?
Although many crypto enthusiasts are indeed looking at decentralized crypto exchanges to replace centralized ones, it is not yet time to discard these large-scale and convenient exchanges any time soon.
While it is true that they do not offer anonymity, high degree of privacy or decentralization, they do offer ease and variety of crypto to trade on. Therefore, unless decentralized crypto exchanges become more functional and widespread, centralized crypto exchanges will stick around for a while.
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