For majority of the investors for digital currency, centralized exchange is among the critical venues for transacting. Centralized exchanges are basically online platforms that are used to perform buying and selling of cryptocurrency. They’re pretty common mediums that investors are using to buy and sell holdings of cryptocurrency.
There are investors who might find the notion of centralized exchange to be misleading because digital currencies are widely known to be decentralized.
On the other hand, what does it meant for such type of exchange to be centralized and why these exchanges are necessary for success of the entire industry?
What’s the Difference between a Centralized and Decentralized Exchange?
First of all, a centralized exchange may be used in conducting trades from cryptocurrency to fiat and vice versa. They can be used too in conducting trades between 2 types of cryptocurrency. While this seems to cover all potential types of transaction, still there’s another market for cryptocurrency exchange.
Then we have decentralized exchange. This is an alternative option actually where it cuts out middlemen, generating what’s typically considered as “trustless” environment. These exchanges act as a peer-to-peer exchange. Assets will never hold by escrow service and the transactions are carried out mainly on atomic swaps and smart contracts.