Difference between decentralized and centralized crypto exchange
Every cryptocurrency trader needs access to a crypto exchange, where they can sell, buy, and transact with crypto. These exchanges need to offer a highly balanced environment for an easy crypto transaction and smooth storage of crypto. Depending on the type of exchange, every platform will have its own set of rules and regulations and the traders are bound to follow them to conduct their businesses.
The crypto exchanges can thus be categorized as centralized or decentralized exchanges. When a cryptocurrency exchange development company begins to lay the foundation of its exchange, it uses the right coding to mold the exchange as a centralized or decentralized one. So, before engaging in providing crypto exchange development services, it is important to know each type in detail.
What you should know about the Centralized Cryptocurrency Exchange?
As the name suggests the centralized cryptocurrency exchange is known as a platform where you can buy or sell digital assets. On this platform, a third-party monitors the transaction and secures the assets on behalf of the buyer and the seller. There is no blockchain present during the interactions, and to interact you will have to submit your personal information for verification. The unique aspect of these platforms is that the more information you share with the platform, the higher will be your withdrawal quota. This type of exchange is very common with a cryptocurrency exchange developer and most companies and platforms offer their crypto exchange development services using this exchange.
What you should know about Decentralized Cryptocurrency Exchange?
A decentralized crypto currency exchange, also known as DEx is in most aspects similar to a centralized cryptocurrency exchange. The only thing that differentiates this exchange platform from the other is that it doesn’t have third party managing transactions. So, it is more of an open exchange platform that uses blockchain to store your funds and via which you can carry out all transactions, on which you rely. To be precise, the decentralized exchange platforms allow peer-to-peer (P2P) trading for which it uses assets, proxy tokens, or an escrow system. This is a big difference as a centralized cryptocurrency exchange works via the IOU-based system.
Further, let’s try to differentiate between the two platforms, and list down the merits and demerits of the crypto currency exchange for the developer’s ease of use.
- In terms of control and security, the decentralized cryptocurrency exchange is superior as it gives the users a lot of control and offers a lot of security too. On the other hand, the platform is in control in the case of the centralized, and with the third party involved, security is a concern.
- Popularity-wise, however, centralized is more famous as it is easy to construct and get started with.
- Centralized platforms also charge fees for using the platform, however, it is nil or very minimal fees when it comes to the other platform. This makes decentralized gain many merit points.
- Centralized is known to provide a wide range of features as compared to the other platform.
- The ease of use and regulation is more in the case of a centralized exchange, whereas, in the case of the other platform, a license from authorities is needed to regulate the platform.
- In terms of liquidity and speed too, a centralized exchange system takes the cake as it is high on liquidity and can perform tasks within a few milliseconds. On the other hand, in the case of a decentralized exchange platform, the same can be cumbersome and the liquidity is high too.
So, counting the positives and negatives of these exchange platforms, a developer or exchange development company should decide on the structure they want to build for ease of every trader, and to attract more business.