What Are Centralized Exchanges in Crypto?
First in the market before DEXs
The cryptocurrency industry has grown rapidly to leaps and bounds that as of the latest, there are currently 310 active cryptocurrency exchanges listed by Coinmarketcap. The global crypto market capitalization is $1.78 trillion, while the total crypto market volume over the last 24 hours $267.33 billion. The total volume in DeFi is currently $24.17billion, sharing 9.04% of the total crypto market 24-hour volume. The volume of all stablecoins is now $220.65 billion, which is 82.54% of the total crypto market 24-hour volume. Bitcoin’s dominance is currently 51.59% of the total crypto market.
101 Million Users
The University of Cambridge’s third edition of the Global Cryptoasset Benchmarking Study published in September 2020 indicated in an update that an estimated total of up to 101 million unique crypto asset users across 191 million accounts opened at service providers in Q3 2020. This 189% increase in users is reflected both in the rise in the number of accounts (which increased by 37%), as well as a greater share of accounts being systematically linked to an individual’s identity. in 2018, the 2nd global crypto asset benchmarking study estimated the number of identity-verified crypto asset users was just at about 35 million globally applying the same methodology.
The statistics and numbers are indicative that, indeed, the age of crypto has arrived and cryptocurrency exchanges continue to sprout to serve the increasing volume of digital trade.
Cryptocurrency Trading
When Bitcoin came about as the first cryptocurrency ever in 2009, there were not yet altcoins or other cryptocurrencies to trade it with. It was not until some few years later when more cryptocurrencies were being created that a cryptocurrency exchange was needed to trade them off among and between each other, much like real-world stock exchanges and forex. Buyers and sellers flourished with many turning it into a full-time job due to lucrative returns. Today, billions of dollars’ worth of coins pass through exchanges on a daily basis.
Centralized Cryptocurrency Exchanges
A vital conduit in transacting, a cryptocurrency exchange is an online platform for buying and selling cryptocurrencies. It is the most popular means of buying and selling digital currencies.
It is somewhat ironic that decentralized currencies are being exchanged in a centralized platform. What is the role played by centralized exchanges in a world of decentralized currency?
The Middleman
Centralized means that transactions in a cryptocurrency exchange are conducted with a trusted middleman or a third party that handles the assets of both transacting buyers and sellers. In this case, the cryptocurrency exchange is the intermediating party that sees to it that transactors can safely trade on the platform and also find trading partners for their clients in the process.
Sometimes an exchange client may forget or lose the keys to their crypto wallets where their digital wallets are stored. Safeguards of the exchange will make secure their clients’ holdings if something like this happens.
Currency Pairs
Centralized exchanges normally offer crypto-to-crypto currency pairings, allowing customers to trade Bitcoin for altcoins. Not all centralized exchanges, though, allow Bitcoin or altcoins for fiat trading. Those centralized exchanges that make possible the trading of crypto and fiat currencies are appealing to newbies.
Success of Centralized Crypto Exchanges
As exchanges come and go, their success depends largely on trading volume. The higher the trading volume, the lower the volatility and also any market manipulation that may happen. Time is of the essence when it comes to volatility. Crypto markets are highly volatile. Prices can change while transactions are taking place. That is why trading volumes are crucial. The higher the trading volume and the faster transactions are conducted, wild market swings are less likely to occur.
Security is another element that centralized exchanges should consider in order to be successful. Some exchanges, though, are safer than others. Investor funds are insured in case of hacks for quite a number of exchanges, those whose security was compromised simply fold up.
Conclusion
For newbies as well as veteran investors, three things must be included in doing own research to optimize user experience:
1. What are the trading pairs?
2. How high is the trading volume? and
3. What are the security measures adopted to protect clients?
Centralized cryptocurrency exchanges enjoy the trust of buyers and sellers to help them accomplish their trading goals. They owe it to their clients to protect sensitive data and asset funds at all costs.
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