The different types of ”Exchanges” to Buy & Sell Cryptocurrencies

When buying Cryptocurrencies like Bitcoin and Ethereum, you’ll have the option of choosing a desired Marketplace to trade on, so let’s explore the most popular options in obtaining Digital Currencies from a certain type of Crypto ”Exchange”

Keep in mind that the word ‘’Exchange’’ is somewhat Semantical, so we should try to get a better understanding as to the different styles of Exchange, because this word is often used to describe any platform that allows the changing of money or in this case digital currencies

Traditional Cryptocurrency Exchange

  • Similar to a Stock Exchange, a Traditional Crypto Exchange lets investors engage in trading using an Open OrderBook that acts as a matching engine to determine which orders can be fulfilled. The Broker acts as the middle by providing a live Orderbook which would list orders that a trading venue uses to record the interest of buyers and sellers

Types of Cryptocurrency Exchanges
Most of the Cryptocurrencies today is traded on Traditional Exchanges that make up most of the trading volume, this is due to the high number of active buyers and sellers. Traditional Cryptocurrency Exchanges will often provide charting software designed for professional traders, this gives the investors more flexibility to trade financial markets and will charge a fee per trade to generate profit.

There can be 2 types of Traditional Cryptocurrency Exchange; Centralized & Decentralized. A decentralized Exchange is governed by code whereas a Centralized Exchange is under the full control of the Brokerage. There is some notable downside to centralized Exchanges like Investors having to comply with AML policies, often forcing users to give up sensitive personal information through a KYC procedure and the growing concern regarding security, as centralized services are easily prone to hacks

Peer to Peer Exchanges

  • This type of Exchange, basically indicates that you’ll be directly trading with buyer/seller instead of dealing with a middleman. Think of it as a Marketplace where everyone is allowed to post a listing in order to seek out a buyer or seller for a certain Cryptocurrency at a set price

Peer to Peer Crypto Exchanges
A Peer to Peer Exchange means the sharing of information, data, or assets between parties is done between the buyer & seller whereas there is little to no involvement of a central authority. Platforms like Localbitcoin & Remitano, require customers to make Bank Deposits directly into the seller bank account instead of the Exchange’s account and have the option of sending Cryptocurrency to a unique address which is limiting the need of a middleman since the P2P Exchange has little involvement between a trade conduct between a party of 2

While a P2P Marketplace is owned by a centralized authority, investors get to set the price and method used to conduct a trade. Customer support may intervene in the event a dispute arises by requesting for personal information and acting like the middleman to further clarify the issue

P2P Exchanges take somewhat a more decentralized approach since any individual is entitled to post a listing that may request for a trade to be conducted in cash, this method aims to cut out the banks and brokers by providing an anonymous online meeting place for those who are looking to trade Fiat currencies and Cryptocurrencies

Crypto Broker

  • Basically, Crypto brokers provide a service that allows buyers and sellers to directly purchase Cryptocurrency from the Exchange itself. A Crypto Broker acts just like a Forex Currency Exchange that is found at airports that allow customers to exchange fiat currency at Broker set rates

Cryptocurrency Broker Exchanges
Customers end up buying and selling Cryptocurrencies at a price set by the broker, which is often above the average Market rate, this allows this Business to generate revenue and profit from the difference in price in exchange for usually providing a user-friendly service . Services, like Changelly or Coinbase quick Bitcoin purchase option is an example of this type of Exchange. Most of the beginner-friendly services that let you directly buy Bitcoin would fall under this category as you’re directly trading with a Brokerage, who may buy or sell a particular Cryptocurrencies

Exchanges tend to provide more sophisticated trading tools that allow traders to professional trade Cryptocurrencies on an open Market. Whereas trading P2P Marketplaces let you reach out to a certain type of buyer/seller that is interested in your proposal and CryptoBroker specializes in providing a hassle-free experience to buy/sell Digital Currencies

Cryptocurrency Exchanges are technically marketplaces that allow clients to exchange money directly to Cryptocurrencies or trade Altcoin Pairs

Most of the trading volume that makes up the Cryptocurrency Market is found on popular Exchanges like Binance, Bittrex and Coinbase that have millions of customers registered and trading from a live Orderbook. Centralized service at the moment seem to dominate the overall Trading volume for now, this likely due service tailored to more professional traders

Considering himself a futurist, Sven has the passion to keep up with the latest technological breakthrough especially surrounding the FinTech sector. From a young age, Sven has been fascinated with Traditional Financial Markets but has after discovering Blockchain Technology in 2014 he has dedicated most of his time staying ahead in the industry

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