Centralized vs. Decentralized Exchanges- Where Should You Tr...| MENAFN.COM

Wednesday, 05 October 2022 12:02 GMT

Centralized vs. Decentralized Exchanges- Where Should You Trade Bitcoin?


(MENAFN- CCP Marketing)

Millions of people are now using Bitcoin. Out of the over 109 million Bitcoin users, many purchase and sell this cryptocurrency for profits. Bitcoin trading is a growing phenomenon because of the very nature of Bitcoin. As the most popular cryptocurrency to date, Bitcoin is both a digital currency and a digital asset. And this has implications for investors.

The nature of Bitcoin as a digital asset means individuals and enterprises can trade it like conventional assets such as stock, real estate, and gold. Many people are trading Bitcoin through various platforms, such as the BitIQ. There are stories of individuals that have become millionaires and even billionaires from trading Bitcoin. 

Where To Trade Bitcoin

Crypto exchanges allow users to signup, buy, sell, and exchange cryptocurrency. You can trade Bitcoin on centralized or decentralized exchanges. The particular option for every trader will depend on their preferences. These preferences result from weighing each alternative's pros and cons. Before presenting these, it is crucial to differentiate the two alternative Bitcoin exchanges.

Centralized Exchange

As the name implies, a centralized exchange applies centralization and centralized control. These centralized exchanges operate like intermediaries between the traders, who can be sellers or buyers. They function like custodians that ensure the Bitcoins and fiat money of the traders are safe. Bitfinex, Kraken, and Coinbase are some of the centralized cryptocurrency exchanges.

Decentralized Exchanges

Decentralized crypto exchanges are the complete opposite of centralized exchanges. No single entity controls the trade or investments in a decentralized exchange. Instead, decentralized exchanges use apps and smart contracts to manage the trading automatically. Uniswap, Curve, and PancakeWap are examples of decentralized exchanges. 

Centralized Versus Decentralized Exchange for Bitcoin Trading

Now that we know how centralized crypto exchanges differ from decentralized cryptocurrency exchanges let's compare the two. The comparison will ultimately help us determine the better alternative to trading Bitcoin. This article will base the comparison on several criteria.

  • Control – The decentralized exchange is good for you if you want to maintain control over your Bitcoin and trading activities. And this is not the case with the centralized crypto exchange, where your power is limited.
     
  • Security  Bitcoin is an asset, and security is an essential consideration for any trader. You don't want to lose your investment through the exchange. In terms of security, the centralized exchange is more secure than the decentralized exchange. The centralized exchange is a custodian of your money, which means better security.
     
  • Ease of use – Bitcoin trading is still new and complicated to many people. As a new trader, you will want to have an exchange platform that is easy to use. In this regard, centralized exchange comes top. Since the centralized entity manages your transactions, you don't have to deal with the complicated stuff. In the decentralized exchange, you have to do most of the work, some of which may be complex.
     
  • Limitation  The centralized crypto exchange has a specified number of cryptocurrencies you trade. And this means that if the platform has not listed Bitcoin, you cannot trade Bitcoin. Decentralized exchanges have no such limitations. Moreover, unlike in a centralized crypto exchange, where the centralized intermediary controls everything, a decentralized exchange leaves more control to you as a trader.

Final Thoughts

From our comparative analysis of the centralized and the decentralized crypto exchanges, it is not easy to pick either side as the best. Each has its advantages and limitations. But for novices in Bitcoin trading, the centralized exchange is the better alternative. It provides all the support you will need. However, as you become more experienced, you should move to the decentralized exchange, where you will have more control and opportunities.


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