Typically :
an exchange is an institution or platform with its core focus on trading.
That is to say a fair exchange of commodities or financial instruments.
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Insert Crypto here :
Since the emergence of blockchain technology and cryptocurrency to the birth of the first idea to create an exchange for it all together.
Centralized finance came around first before Decentralized ones.
The choice of a user on the decision of which exchange they use is mainly dependent on preference.
Types of exchanges :
1). Custodial exchanges.
2). Noncustodial exchanges.
1 - Custodial exchanges :
Custodial exchanges are centralized that represent blockchain-based assets within an internal database that is only controlled by the exchange.
This would mean that if for example you purchased Bitcoin on the exchange , You are only buying a representation of this asset and it is only when it is withdrawn into a noncustodial wallet that said asset has become fully yours.
Advantages:
a). Being able to deposit and withdraw fiat currency.
b). High trade volume.
c). They can move large funds in and out of the exchange.
Disadvantages :
a). Trusting them with sensitive information.
b). Giving the exchange full custody of your assets.
c). They're usually targeted by hackers which usually results in lack of access or large loss of funds.
2 - Noncustodial exchanges :
This is the type of exchange that doesn't need to have custody of your assets or any sensitive information in other to trade , this is done to keep assets safe and secure.
Trading on this type of platform ensures liquidity and security and they are super easy to operate.
Advantages :
a). The traders holds their own assets (money).
b). No account breaches as there are no valuable information required to trade.
c). Trades have limitless access to their funds.
Disadvantages
a). No fiat to Crypto or Crypto to fiat features
b).There is a little to no customer service for traders
c). Trades can not be cancelled once the order has been made.
Lastly , to sum it all up :-
As earlier mentioned , some exchanges are selected by users based on preferences and sometimes because exchanges and it's reputation.
But its always been with Centralized exchanges there will always be loss of funds as there aren't solid frames in place despite the process it requires to register and sign up.
To also add , regarding the disadvantages of noncustodial exchanges there are some like ChangeNOW whose team have gone and done the "extra" to make sure it is possible purchase Crypto with fiat on a noncustodial platform.
Another thing that stands them out asides having the most user friendly interface is the customer care service.
The team finds you the best rates out there and delivers it right back into your lap or is it palms (whatever works for ya , haha!!)
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