Many beginners are wondering where to buy cryptocurrency, as well as where to store bitcoins.
What is a cryptocurrency exchange?
Cryptocurrency or crypto exchange is a trading platform where users can make orders to buy or sell cryptocurrency.
Let's say you want to buy Bitcoin (Bitcoin, BTC) for a certain amount of throne (TRON). When you place a trading order, the exchange will try to find someone for you who wants to buy TRON and sell Bitcoin. A deal will made when the selling and buying prices of two players will coincide. An order will not be executed if there are no buyers / sellers at the stated price.
Exchanges don't trade its own funds, but are only an intermediary between the buyer and seller of the cryptocurrency. Therefore, the prices for cryptocurrency on such exchanges will be the most real, since they are completely dependent on supply and demand (market).
However, do not forget that basically exchanges charge a commission for withdrawing funds or for each transaction made. Comission on every exchange could differ. For example, the commission on Binance exchange is floating and depends on the number of BNB tokens (Binance cryptocurrency) on your wallet: from 0.1% to 0.02%.
Types of cryptocurrency exchange
Centralized exchanges (CEX)
Centralized exchanges act as a direct intermediary between the buyer and seller of cryptocurrency. Such crypto exchanges create their own hot wallets that are stored on the exchange's servers and are provided to the user. For many, this is a plus, since one wallet on the exchange can store the cryptocurrencies of different blockchains with different consensus, and a clear and convenient interface allows users to more confidently store and trade assets. In addition, many centralized exchanges are official companies and are regulated by government through licenses.
It is worth noting that centralized exchanges have many opportunities, such as margin and futures trading, which decentralized exchanges cannot afford.
One of the main disadvantages of such exchanges is the commission, which can fluctuate depending on the exchange and its loyalty program. You also always need to be aware of the possibility of hacking the exchange, for example, hacking and stealing $ 40.5 million in May 2019 from the Binance cryptocurrency exchange, however, I emphasize that the exchange compensated the users for losses.
The last minus is the state and internal regulation of the exchange. There is always a minimal chance that your account may be blocked by the exchange itself, or the exchange will be blocked at all.
However, centralized exchanges are currently the most popular, which means there will be more applications for purchase and sale (turnover / volatility).
Decentralized P2P Exchange (DEX)
Decentralized exchanges operate on smart contracts of a certain blockchain, and companies provide only an interface for convenient connection to them. Users trade on the blockchain through a smart contract directly with each other, storing all funds on their wallets. The commission on such exchanges is minimal or absent, except of transaction cost.
DEX exchanges can only trade tokens of their blockchain, but are characterized by a high security degree. The order processing speed depends on the transaction processing speed on the blockchain. Volatility on such exchanges is much lower than on centralized exchanges.
It is also worth noting that developers have difficulties in creating of exchanges due to the immutability of smart contracts and the complexity of the technology. That is why decentralized exchanges are inferior to most CEX.
One of the notable decisions of the Lab3M team is the development and implementation of a decentralized crypto exchange for our partner BIKI. DEX operating in the TRON network allows maintaining volatility at a high level. BIKI DEX combines a decentralized exchange and token swap.
The easiest way to buy or sell cryptocurrency is token swap. In swaps, users buy cryptocurrency directly from the owner of the exchange, for which the latter take their commission or make it hidden by increasing the price.
There is a fundamental difference between all exchangers. Some work with your wallets, while others generate their own for you. Who to trust is up to you to decide.
The main functions of crypto exchanges
KYC users - identification of users by personal data and metrics within the system
Multi-blockchain support - support for currencies of various blockchains, regardless of consensus
Elements of a decentralized exchange - development of a DEX exchange and its implementation in centralized markets
Margin trading - the introduction of a margin lending service, calculation of stop loss based on leverage and market trends
Spot Trading - Instant Cash Transactions
Futures trading - implementation of the USDT borrowing function for providing in BTC from spot wallets with zero commission for trading on the futures platform
Fiat funds support - acceptance and withdrawal of fiat funds through the introduction of payment gateways
Support for NFT tokens - introducing a wallet and a marketplace for storing and trading NFT tokens
OTC trading - introduction of a direct over-the-counter trading platform without affecting the market
P2P trade - direct trading
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