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5 Main Types of Crypto Exchanges

A crypto exchange is a platform where you can trade cryptocurrencies. You usually do this via the exchange’s website, although some platforms also have mobile apps for portable devices.

The list of available cryptocurrencies, user rules, and the trading process depend on the exchange type you select. It’s imperative to understand different crypto trading platform categories, so read the article below and discover more about the available exchanges.

1.Centralized Exchanges

A single authority is behind a centralized (CEX) exchange. The trading process is as simple as it can get, which makes CEX platforms the best option for newbies. Another advantage is that they usually offer both crypto and fiat currencies, so you can, for instance, buy Litecoin with USD.

CEX authorities act as mediators in transactions, indicating that they take control of your funds during the transfer. Users often need to provide personal data to execute transactions. However, centralized exchanges usually meet strict regulations, and that makes them a safe trading option.

Here are the top centralized exchanges to try:

  1. Paybis. The platform covers over 180 countries, and it’s available in 48 states in the US. It offers over 150 currencies, including options to buy and sell crypto for fiat currencies. 
  2. Kucoin. It’s an entire trading platform that supports swapping over 700 currencies. It also offers spot and margin trading, options to earn cryptocurrencies, and other services.
  3. Coinbase. Individuals can buy, sell, and use crypto, as well as earn or borrow crypto and explore NFTs. 
  4. Binance. The platform has over 167 million registered accounts, and you get a reward if you verify your profile. Binance is an all-around service with options like copy, spot, and margin trading.

2.Decentralized Exchanges

Unlike centralized exchanges, decentralized (DEX) platforms don’t have a central authority. They execute transfers based on smart contracts and other crypto technologies. The exchanges never take control of your funds, and private keys remain in your custody. Most DEX platforms don’t require registration, which makes them more anonymous than centralized platforms.

In the DEX vs CEX showdown, it’s vital to consider several disadvantages of decentralized exchanges. The lack of regulation could cause safety and efficiency problems, which is why they are usually slower in finishing a trade than CEX platforms. Also, decentralized exchanges aren’t beginner-friendly — there’s a learning curve to understand how everything works.

If you’d like to try decentralized exchanges, these are the top options:

  1. Uniswap. Ever since its founding in 2018, over 71 million transactions have been made through this protocol. Its ecosystem supports over 300 integrations and features a growing network of DeFi apps.
  2. Pancakeswap. This multichain DEX allows trading crypto via multiple chains, joining liquidity pools, and moving assets across chains. It even has a gaming marketplace. 
  3. 1Inch. You can pick between simple and advanced trading modes, which makes this platform suitable for both beginners and advanced investors. Other features include over ten bridges and the option to buy crypto.

3.Peer-to-Peer Exchanges (P2P)

A direct connection between two or more computers is a peer-to-peer network. If we are talking about P2P crypto exchanges, specialized apps and protocols are how you transfer funds directly to another user. 

P2P exchanges offer higher anonymity than CEX platforms since no personal data is necessary. There’s an option to negotiate the price, but there aren’t as many trading options. You should be careful when it comes to fraud. Many platforms offer an escrow feature as a way to protect users, and most exchanges also have a review system to recognize reliable traders.

Here are the top P2P exchanges:

  1. Bisq. The exchange supports Windows, macOS, and different Linux versions. It’s fairly easy to use it to acquire or sell BTC for fit or other crypto coins.
  2. Hodl Hodl. With over 100,000 registered users and seven years in business, this anonymous P2P exchange is a reliable way to swiftly sell and buy BTC.
  3. OpenPeer. This P2P exchange works via a web-based app. You can sell and buy crypto easily and explore direct trading options via a simple software solution.

4.Retail Brokerages

These are usually stock brokers that implement crypto on top of their default stock and other asset trading options. The main advantage of retail brokerages is that they comply with relevant regulations in your area as long as you pick reliable services. The entire process is beginner-friendly, and you can use the local currency. The support is always ready to help.

However, you can’t stay anonymous because Know Your Customer (KYC) compliance is mandatory. Also, cryptocurrency and trading options are usually limited compared to CEX and DEX platforms.

These are some recommended crypto retail brokerages:

  1. Robinhood. The platform claims that you could receive 3.5% more if you trade assets here. It offers 24/7 support and all popular digital currencies.
  2. Webull. Apex Crypto provides your account, and it’s possible to trade from the platform’s app. The minimum required to join is $1, and you can acquire BTC, BCH, and LTC.

5.OTC (Over-the-Counter) Exchanges

These are usually extensions of existing crypto exchanges that focus on offering a specialized service to institutions or individuals willing to invest large sums of money. 

Priority support, providing quotes upon requests, and customized solutions are among the top features. You need large amounts to qualify, and the application process is slow and tedious.

Here are some OTC crypto exchanges to try:

  1. Kraken OTC. For offers from $100K to $1M, you’ll receive a single quote. There’s an automated request-for-quote system, and there’s an option to settle transactions within a day.
  2. Coinbase Prime. The institutional trading option offers over 240 assets for trading and more than 400 for custody. Multiple execution venues, cold and hot wallet storage, and transparent pricing are other features worth mentioning.

Conclusion

Various types of crypto exchanges ensure any investor can find a platform in line with their expectations. If you need a secure platform that meets relevant regulations, centralized exchanges are your best pick. Those looking for anonymity could try decentralized or P2P exchanges, but only if they are aware of potential risks on these platforms. Finally, if you feel ready to invest large sums, OTC platforms might be a good choice for a personalized service.