In the world of digital trading, crypto exchanges have helped to bridge the gap between buyers and sellers. Cryptocurrency is now getting adopted more than ever with the help of crypto exchanges. Although they might seem simple, there is a lot to dissect with the groundbreaking platforms. This article will take you on a journey through all you need to know about them and the top crypto exchanges.
What are crypto exchanges?
Crypto exchanges are platforms that buyers and sellers use as a medium to trade cryptocurrency. Many traders and investors flock to crypto exchanges to trade their assets and earn profit. Assets traded on crypto exchanges include digital and fiat currencies alike. The functionalities of crypto exchanges go beyond buying and selling cryptocurrencies. You can also swap one crypto for another. For example, you can swap Bitcoin for Ethereum, Dogecoin for Litecoin, etc.
Crypto exchanges house many assets that may be suitable for all kinds of traders. One of which is stablecoins which are pegged to the U.S Dollars. Alternatively, you may trade more volatile assets like Bitcoin. Through crypto exchanges, you may also explore many trading options like crypto arbitrage, NFT, scalping, and so on.
Types of crypto exchanges
Crypto exchanges are used in more than one way. Here are the main types of crypto exchanges:
Centralized crypto exchanges
Centralized crypto exchanges usually have intermediaries that stand between buyers and sellers. Such intermediaries include companies responsible for building these crypto exchanges. Centralized crypto exchanges are brought into the limelight through their mobile apps and the platform’s website. To use a centralized crypto exchange, you will need to sign up and fill in some necessary details. In some crypto exchanges, a process known as KYC is carried out. KYC stands for “Know Your Customer”. It verifies and authenticates the users of the crypto exchange platform. A major benefit of using centralized crypto exchanges is the convenience it provides. Some examples include Coinbase, Gemini and Kraken.
Decentralized crypto exchanges
These crypto exchanges stand on their own and do not have any intermediaries. They are built with smart contracts which are self-executing. Hence, no third party is needed to facilitate the process of transactions between buyers and sellers. It is also run by a group of decentralized computers. This is why there is no sole entity that may account for it. Unlike centralized crypto exchanges, you don’t need to sign up to start trading. You may simply go to the site or mobile app and link your wallet. Keep in mind that decentralized exchanges do not support fiat currencies. Hence, you will need to have crypto in your digital wallet initially to trade on your crypto exchange account. Decentralized crypto exchanges provide more benefits like a wider range of cryptocurrencies and optimum control. However, customer support services are not available to attend to any issues. Examples include AirSwap and Uniswap.
Hybrid crypto exchanges
This type of crypto exchange is a mix of centralized and decentralized crypto exchanges. It fuses the advantages of both exchanges to create an advanced platform. Hybrid crypto exchange takes the convenience and scalability of centralized exchanges. The perk taken from decentralized exchanges includes tight security.
Features of a good crypto exchange
To get the best experience out of your crypto exchange, they need to be embedded with certain features. Here are some things to look out for in a crypto exchange:
- Security: You need to ensure that your crypto exchange is tightly secured. Since crypto exchanges, especially centralized ones, may be at risk of hacking, look out for an insurance policy. This will protect your funds in case of hacking.
- High liquidity: Crypto exchanges with liquidity are usually more enjoyable to use. This is because you can quickly get buyers and sellers on the platform instead of waiting. However, crypto exchanges with high liquidity are characterized by more trading volume. Hence, exchanges that fit into this category are the top ones.
- Coin variety: Some exchanges just offer popular coins with few options to choose from. At any point in time, you may want to swap or buy a new coin. If you are looking to explore a wide range of coins, ensure that your crypto exchange has a plethora of coins.
- Easy access: It may be difficult for some crypto exchanges to penetrate certain geographical locations. Some states and countries have laws concerning crypto regulation hindering certain exchanges. So it is important to look for one that caters to your location.
Top Crypto Exchanges
Binance was launched in 2017 and is currently the biggest crypto exchange worldwide.
They offer different cryptocurrencies and market chart selections for beginners and experts exploring diverse options. Binance’s transaction fees are pretty cheap. They charge 4.5% if you buy cryptocurrencies with a credit/debit card, 0.1% trading fee, and 0.5% for instant buy/sell.
Their withdrawal fees depend on the cryptocurrency you want to withdraw.
- A wide range of cryptocurrencies is available worldwide— except Binance U.S.
- Low transaction fees.
- Different trading options and order types.
- Complex platform.
- Regulatory issues.
- No built-in digital wallet— though Binance recommends Trust Wallet.
While the platform may be complicated, it is ideal if you’re looking to explore different options. However, Binance U.S is quite limited, which could be inconvenient for some non-U.S-based traders.
Established in 2011, Kraken is one of the earliest crypto trading platforms providing exchange services for various cryptocurrencies. Asides from buying and selling crypto, Kraken offers margin accounts, futures trading, indices for high-level trading, etc.
Kraken’s fees differ depending on the services involved and if you’re using Kraken Pro. They typically charge 1.5% for Instant Buy/Sell, while the trading fees are charged when the trading order is executed. Charges for deposits, withdrawals, etc., are calculated based on the cryptocurrency. Services like account maintenance and staking are free.
- Supports a wide selection of cryptocurrencies.
- Easy interface.
- High liquidity exchange.
- Security issues like hacking.
- Higher fees when not using the Pro version.
Overall, Kraken is easy to use and reliable, but ensure you understand risk management before using it.
In 2012, when it was founded, Coinbase was initially a platform for Bitcoin transactions. Now, they offer exchange and trading services for over 100 cryptocurrencies on their two platforms: Coinbase and Coinbase Pro. Coinbase charges are displayed on the trading interface, so you know how much you are paying while entering a trade. Their trade fees are fixed, but trades over $200 are charged based on percentage. Trades are also subject to 0.5% spread-based fees. Account funding and withdrawals are charged differently, and coin conversions are subject to a 2% charge.
- Easy to use.
- Opportunity to earn more cryptocurrency through Coinbase Earn program.
- Lower pricing with Coinbase pro.
- High transaction fees.
- Poor customer service.
- Limited altcoins to trade.
Coinbase is great for beginners as it’s simple to use. However, the pricing and customer service aren’t satisfactory. If you can deal with it, then you should consider using it.
Gemini was founded by the Winklevoss twins in 2014 after they had difficulties finding reliable crypto exchange services. It provides a simple interface to carry out cryptocurrency transactions and trades.
Gemini’s fee structure is quite complex but transparent and depends on the amount you’re trading and the platform used (mobile or desktop). Fees start from $2.99 for trades worth $50 but less than $200, while trades from $200 pay 1.49% fees. The ActiveTrader platform charges fees depending on a 30-day total trading volume.
- Available worldwide and in all 50 states in the U.S.
- They provide hot wallet insurance.
- Strong user security.
- High trading fees.
- Limited cryptocurrencies.
Gemini is great for both beginners and experts, as they offer different trading options and safety insurance.
FTX was founded in 2019 and offers several unique products like derivatives, trading options, and leveraged tokens. Unlike some competitors, FTX supports over 300 cryptocurrencies, though FTX U.S offers lesser due to strict regulations. They are known for being regulation compliant and have said they’ll remain that way. FTX charges trading fees based on a maker/taker structure, which varies based on 30-day trade volumes. FTT (the official FTX token) holders can receive fee discounts.
Additionally, fees are charged for withdrawal and creating/trading leveraged tokens.
- Allows margin and futures trading.
- Gives access to advanced markets.
- FTX U.S offers limited options to users.
- No live customer support.
FTX is a good platform, as they are regulation-compliant and offer features that cater to both amateurs and professionals.
As a crypto trader, a good crypto exchange platform is an essential tool for your crypto trading journey. The top crypto exchange platforms listed are all reputable and safe to an extent. However, it is advised to do your due diligence and choose an exchange provider that offers services that are most important to you.