Cryptocurrencies have taken the world by storm, and their popularity has only been growing since their inception. If you’re new to this world, you might be wondering how to buy, sell, or trade digital assets. Cryptocurrency is an excellent way to make money, and buying, exchanging, and trading these digital assets is essential for investors. In this article, we will go over the four primary methods for purchasing cryptocurrencies: centralized exchanges (CEX), decentralized exchanges (DEX), exchanging currencies with the use of crypto wallets, and P2P trading.
Centralized Exchanges (CEX)
Centralized exchanges are platforms that provide various services to their users, including buying, converting, P2P exchanges, lending, staking, NFT’s, and more. Some popular CEXes include Binance, KuCoin, and Gemini. To use these platforms, users are required to go through KYC (know your customer) and upload personal documents to verify their identity. CEXes offer a range of instruments to trade, from fiat money currency pairs to the most exotic ones.
One of the downsides of trading on CEXes is that you cannot remain anonymous, and you do not have full control over your funds because you transfer your money to the exchange’s wallet. However, CEXes provide a user-friendly graphical interface with chart options, making it easy to analyze the market trends.
Decentralized Exchanges (DEX)
Decentralized exchanges, also known as DEXes, do not have intermediaries such as website owners or services. Every transaction on DEXes is made with the help of smart contracts, which are open-source programs that connect buyers and sellers of cryptocurrencies. Some popular DEXes include Uniswap, PancakeSwap, and SushiSwap.
The advantage of DEXes over CEXes is that you don’t need to register an account or upload personal documents to verify them. Every transaction on DEXes is a “true” one, meaning you receive coins to your wallet instantly. You can remain anonymous when making transactions on DEXes, and you keep your funds under your own control. However, DEXes usually have less variety of services compared to CEXes, less graphical interface options, and do not work with fiat money.
Crypto wallets, such as MetaMask, Brave, Exodus, Trust Wallet, Trezor Wallet, and Ledger, are another way to exchange cryptocurrencies. Wallets can be in the form of a browser extension, stand-alone applications, physical devices, or web interfaces. The main difference between wallets and DEXes is that the user doesn’t have to open a website or separate services all operations can be done within the wallet’s interface.
Like DEXes, wallets also allow you to keep your funds under your control, and you can remain anonymous. However, wallets do not have a graphical interface with chart options, and the user must enter the address of the second cryptocurrency in the pair manually. Crypto wallets are similar to DEXes in terms of pros and cons. They are also designed to work with cryptocurrencies only.
P2P exchange is a type of exchange between users, where you can exchange your coins directly with another person and choose an intermediary as a guarantor. Direct exchange is when you find a person to make a deal with, transfer your fiat money to them, and receive cryptocurrencies in return or vice versa.
The main disadvantage of P2P exchange is that you need to trust your counterparty, which is not always possible to achieve. However, P2P exchanges allow you to keep your funds under your control and remain anonymous.
In this article, you have learned about the various methods of trading and exchanging cryptocurrencies. However, before making a decision, it is crucial to consider your goals and proceed accordingly.
While trying out different options can be beneficial, it’s important not to put yourself in a risky situation. Remember that caution is key when dealing with these volatile investments.
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