1. What is a centralized crypto exchange?
This is an online platform and the most common way to trade crypto-currencies.
This means buying / selling digital currencies via Fiat (Fiat / Crypto-currency pairs), as well as buying / selling digital currencies through other digital currencies (pairs of Crypto-currency / Crypto-currency). Exchange can be considered an online market for the entire crypto-currency network.
2. What does it mean for the exchange to be centralized?
It means trusting someone else to process your money.
In the past, all institutions involved in finance were called centralized. The word "centralized" means that there is a trusted intermediary that processes an asset that can be traded. For example, a client trusts money to banks for their storage. This institution fully controls the client's money.
In many cases, this is much safer than managing the funds yourself. Money of clients in banks is well guarded. The bank also offers various services (for example, it gives loans), because it has a lot of money and a trusting relationship with the client.
Centralized crypto-exchanges are the same. The user can store their money on them. The currency is now in the hands of the exchange, and trust to the intermediary makes it easier for the client to recover the lost password and provides two-factor authentication, since this customer has granted the exchange full access to his account. Also, the client is relieved of the pressure that he controls his money at 100%.
There are many stories about how investors lost hundreds of thousands of dollars, because they lost the secret key from the hardware purse. If their money were on a centralized exchange, they would not have to worry about it; for the restoration it would be sufficient to show the passport or otherwise confirm its identity.
3. How do centralized exchanges differ from decentralized ones?
Crypto and currency are decentralized in nature, which allows exchanges to be decentralized.
Simply put, decentralized crypto-exchange exchanges remove the intermediary, creating an "environment that does not require trust". Transactions are made through smart contracts and atomic swaps, so that the currency never passes through escrow services - real P2P deals are being made.
Decentralized crypto-exchanges are still in their infancy and are not very popular, but in 2018 there can be great progress in the field of decentralized exchanges.
4. Are there any Fiat / Crypto-currency pairs on all centralized exchanges?
No.
On all exchanges there are pairs of Crypto-currency / Crypto-currency (for example, exchanging 1 BTC for 13 ETH), but not all have Fiat / Crypto-currency pairs (for example, exchange $ 700 for 1 ETH). The most popular exchanges offering couples Fiat / Crypto-currency are:
- Coinbase... The world's most popular exchange. Supports Bitcoin, Bitcoin Cash, Litecoin and Ethereum.
- Gemini. New York Stock Exchange, providing high standards of US regulation. Supports bitcoin and etherium.
- Kraken. There are a lot of pairs of crypto currency / Fiat on the stock exchange, and not only with the dollar and the euro.
- Robinhood. A popular trading application that provides fiyatnye pairs for bitcoin and etherium.
5. Is the volume for exchanges important?
The more volume on the exchange, the less volatility.
If Alice wants to buy 1 BTC for the current exchange price of $ 10, and the volume on the site is extremely high, then most likely she will buy 000 BTC almost instantly.
If she tries to buy 1 BTC for $ 10 on a low-volume site, she can absorb all the sell orders, but still not buy the whole bitcoin. Alice will have to buy more expensive orders to satisfy her order; it will lose money and increase the value of bitcoin on this exchange.
6. Are centralized crypto-exchanges safe?
No centralized exchange is protected from hacking.
Throughout the history of crypto currency, there have been a lot of hacking, and in many cases, exchanges turned out to be without funds to pay customers stolen money.
Decentralized crypto-exchanges can not be hacked, but users are much more vulnerable to blocking their money themselves. Popular centralized exchanges are safe just like safe banks.
7. Is verification required to create an account on the exchange?
Countries do not yet have a clear regulation of crypto currency, but exchanges around the world require minimal verification to verify their account.
Many exchanges allow users to create accounts without identity verification, but these accounts have very small input / output limits.
Usually, verification requires a photograph of a passport or other identity document, and two-factor authentication (DFA) must be enabled. One of the algorithms of DFA work: every time a user enters your account, you must enter a secret password, which is sent by a message to his phone number.
8. On which exchanges are the largest volumes and most of all currency pairs?
Although the exchanges are still new and every day are becoming more popular, some of them over the past year have stood out by the volume and amount of coins available for trading.
- Binance. Although this exchange was launched only in 2017 year, it has the largest trading volume. Binance is located in China and is so popular that most altcoins after their ICO first go to it. Verification of the second level allows you to output up to 100 bitcoins, and the first one - 2 bitcoin per day.
- Bittrex. This is a fairly old crypto-exchange from the United States. The most popular coins are BTC and ETH, but Bittrex has more than 250 trading pairs. The exchange is known for a simple interface for beginner crypto users.
- Bitfinex. The stock exchange in Hong Kong is another old stock exchange, which is still in the top ten in terms of trading volume.
- Upbit. Although many South Korean crypto-exchanges suffered during severe measures against the country's crypto currency, UpBit remained in the top, and in January this year it broke the record of the highest trading volume in history.
- GDAX. The Global Digital Asset Exchange is an extension of CoinBase, one of the most popular exchanges in the world. GDAX is not suitable for beginners, but very useful for margin trading, as well as crypto / fiat and crypto / cryptocurrency trading. In addition, the amount of users up to $ 250 is insured by the US Federal Deposit Insurance Corporation.
GDAX offers many additional features and functions that Coinbase does not have, but the president of Coinbase, Adam White, said: "Coinbase is intended for retail customers, and GDAX is focused on servicing experienced and professional traders».
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