For most cryptocurrency investors and traders, centralized crypto exchanges are among the most crucial platforms of transacting. Centralized crypto exchanges are online platforms where crypto traders and investors can buy and sell digital currencies. They are the most common means of buying and selling crypto assets.
Some investors may find the idea of a “centralized” exchange to be somehow confusing since cryptocurrencies themselves are often billed as “decentralized.” What does it imply for an exchange of this type to be “centralized,” and why are these exchanges so crucial for the success of the crypto industry in general?
The Use of Third Parties
In the term “centralized cryptocurrency exchanges,” the concept of centralization denotes the use of a middle man or third party to help carry out transactions. Both buyers and sellers trust this middle man to handle their virtual assets. This is similar to a bank setup where a customer trusts the bank to hold their money.
The reason for this setup is that banks provide security and monitoring that individuals cannot get on their own. Regarding centralized crypto exchanges, the same principle applies. Crypto investors trust not only that the exchange will safely complete their transactions for them but also make good use of the community of users in the platform to find trading partners.
In the case of digital currencies, which are primarily stored in digital wallets, an investor can lose hundreds or thousands of dollars in crypto-asset holdings just because of forgetting their private keys. Unlike decentralized crypto exchanges, centralized crypto exchanges can help investors get back their crypto holdings even after losing their private keys.
Differences between Centralized and Decentralized Crypto Exchanges
Centralized exchanges can facilitate fiat to crypto and crypto to fiat trades. Besides, they can still facilitate trades between two different digital currencies. While this may appear to cover all the potential transaction types, there is still a market for a different kind of crypto exchange.
Decentralized exchanges are the second alternative; they eliminate the concept of a middle man, creating what is often regarded as a “trustless” environment. These types of exchanges operate as peer to peer platforms. Assets are held by an escrow system, transactions are carried out on smart contracts, and atomic swaps.
The major difference between centralized and decentralized exchanges is the concept of a middle man. Decentralized platforms are less widespread and less popular compared to centralized platforms. Nevertheless, there are more decentralized exchanges than centralized exchanges, and it is projected that they will give centralized platforms a run for their money in the future.
It is more common for a centralized exchange to offer crypto/crypto pairs. This allows customers to trade, for example, bitcoin for XCT tokens. However, fewer exchanges provide fiat/crypto pairs, which would enable, say, XCT for USD exchanges.
Some of the biggest cryptocurrency platforms in the world are those that offer fiat/crypto pairs. One of the factors that give them a more competitive edge over centralized exchanges is that they act as direct access points to the crypto world.
Since many investors in the crypto space are relatively new to investing in cryptocurrencies, they may be more likely to turn to these types of exchanges. xCrypt is a good example of such exchanges that is fully compliant with securities.
The xCrypt Digital Asset Exchange
The xCrypt ecosystem launched the final version of its xCrypt exchange on October 11th, 2019, for the trading of digital currencies. The launch came after several months of security tests and multiple exciting features.
The xCrypt exchange provides crypto traders and investors with the best prices available among 50+ exchanges, hence maximizing their profits. Through our deep order books, we enable crypto traders to get the best buying and selling prices in the crypto market.
Security is xCrypt’s top priority, especially in the wake of the recent crypto exchange hacks all over the world. 99.5% of our users’ funds are stored separately from company holdings in a dedicated trust account. Digital assets are stored in cold wallets embedded with extra security measures such as multi-signature systems and two-step authentication.
The xCrypt exchange is a fully regulated exchange that features KYC and AML processes implemented through in-house procedures. We strongly believe that by using our platform, there would be no more complicated transfers between FIAT money and cryptocurrency. To foster the utility value of digital assets, we are planning to team up with more partners and introduce xCrypt Debit Cards to hold both balances and e-money as well as digital assets.