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There are hundreds of cryptocurrency exchanges around the world, including AAX, Binance, Coinbase, Kraken, FTX, and BitMEX, among others. Unlike traditional exchanges, users can directly access the websites of any of these cryptocurrency exchanges, register, and start trading. Trading is done by connecting directly to the exchange, with no additional brokers or intermediaries involved, apart from the exchange itself acting as a counterparty for order matching.
Another significant difference compared to the traditional model is that centralized cryptocurrency exchanges (CEXs) actually control the order book and users' funds. CEXs are responsible for maintaining the security of users' funds, protecting them from hacker attacks, making trust in the exchange as a good custodian a crucial factor.
Cryptocurrency CEXs are known for their speed, although not as fast as traditional exchanges. This speed is influenced by the number of customers they serve and their geographical locations. A traditional exchange typically serves a limited number of customers, with its trading servers located on-site. In contrast, a cryptocurrency exchange needs to serve anyone in the world with a computer.
Most of the liquidity in the cryptocurrency market is found on centralized cryptocurrency exchanges because they are generally user-friendly. Users don't need to manage their own keys or learn about complex wallets; they only need an email and a password to start trading. However, the downside is that all funds are stored in one centralized location, making it a target for exchange hackings, of which there have been several incidents in the past.
Decentralized exchanges (DEXs) represent the next stage in exchange development, aiming to provide a more secure trading environment and various other benefits. |
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Post time 10-10-2023 08:43:28