In the XXI century, a phenomenon was invented that ignited the whole world. Cryptobirds quickly drew the attention of investors, developers, programmers, and a little later- regulators. It is evident that by utilizing such tools, you can significantly increase your investment.
To begin with, the definition of cryptocurrency exchange should be offered, and there will be a number of them:
- A crypto exchange is a digital market where traders can buy and sell digital currencies at market rates.
- A crypto exchange is an online platform that acts as an intermediary between buyers and sellers of cryptocurrencies.
There are many crypto exchanges, and soon their number will be more than 1200. In this article, we will discuss two types of cryptocurrency exchanges, as well as a more convenient trading option- a broker.
A Trading Core
A trading core is the most significant feature of a cryptocurrency exchange. The speed and correctness of all activities on an exchange rely on the effectiveness of the code. The core performs multiple priority tasks:
- Checks all issued orders for the security of the virtual assets. In other words, based on the current balance of a trader, it permits or prohibits placing an order to buy or sell cryptocurrencies.
- Generates and modifies records in the database when placing new orders and completing current ones.
- Prepares data for display in the trading terminal: price levels, values for charts and stock glasses, a list of the last completed orders.
All virtual assets are stored on digital wallets, and users transfer assets there for trading. There are two types of wallets: hot and cold wallets.
A hot wallet is used to receive money on a crypto exchange and enable payments to other traders. It is always active and should have a positive balance.
A cold wallet is used to keep the main holdings of a crypto exchange. They are disconnected from the internet, barring hackers from stealing money from the exchange in case of a cyber-attack. An external drive or a separate computer can act as a cold wallet.
A website is the most significant part of all traders. It must be functional, intuitive, and convenient, and support activities with mobile gadgets. By using the web interface of the exchange, a user gets access to all the essential functions of the exchange like:
- Registration and subsequent account verification;
- Deposit and withdrawal of digital currencies and fiat money;
- Account balance, the ability to place trade orders for the purchase and sale of cryptocurrency;
- A comprehensive overview of all transactions in buying, selling, depositing, and withdrawal history;
- Stock charts for traded pairs, currently buy and sell orders, history of the last orders and so on;
- Background and quick access to customer support.
Now let us discuss unofficial types of centralized crypto exchanges. Conventionally, they can be classified into two groups. The first category offers the opportunity to buy a large number of several coins and hold them for long periods. The second group provides a smaller list of coins, but a wider variety of trading styles- the ability to short and use leverage.
Regarding the first type, a platform should have one of the best interfaces and a great trading core. Several layers of verification and two-factor authentication are required. The number of pairs traded is at least 100, and new coins are regularly added. Sometimes there is a digital currency in which you can pay a commission with a significant discount.
A large trading volume gives rise to a high liquidity, and the traded coins are added according to stringent guidelines, for instance, its future must have the potential of gaining by 5 to 10 times its current price. The exchange will suit long-term investors, but when a coin grows, the terminal starts to hang heavily.
The second category is more suitable for active traders. It facilitates trading in both directions that is, opening both short and long positions. Leverage enables traders to repeatedly make profits, while it is worth remembering that the risk increases. It is also possible to place stop orders to prevent making losses.
However, such types of exchanges have several severe drawbacks like: lack of regulation, an always hanging terminal during the growth of trading activity, frequent lack of liquidity, high commissions for depositing/withdrawing funds, as well as the trade activities themselves, and a sophisticated interface that makes it hard to integrate new traders.
Additionally, the margin is crooked, which can cause automatic closing of the stop-out (margin-call), if there is no stop-loss. Generally, it is a bit strange, and the administrators of such exchanges can trace unfair behaviour.
In conclusion, the crypto world will continue to grow, and new exchanges and coins will be issued. The space is quite extensive and enables crypto enthusiasts to come up with various know-how on its base; as a result, there will be many tools for investing.
At xCrypt, we take security extremely seriously, and our crypto-asset exchange is built on the ‘Security First’ principle. We are eager to share our expertise with the broader public for the world to become happy, safe, and wise.