Just like a regular stock exchange or a currency exchange counter that you usually see at an airport, cryptocurrency exchange allows you to exchange one cryptocurrency for another, but on…

What is Cryptocurrency Exchange? Difference Between Normal & Decentralised Exchange

What is Cryptocurrency Exchange? Difference Between Normal & Decentralised Exchange

Just like a regular stock exchange or a currency exchange counter that you usually see at an airport, cryptocurrency exchange allows you to exchange one cryptocurrency for another, but on an online platform only. There are many websites where you can sell, buy or exchange cryptocurrencies for other digital currencies. If you are willing to do it professionally, you can make use of the fancy trading tools by opening an account on these websites and providing your ID for verification. But if you are interested in cryptocurrency trading on certain occasions, then you can opt for other websites that do not require users to open an account, but you may need to import your private and public keys.

Before you start your research on buy cryptocurrencies from cryptocurrency exchange in India, you must learn about different types of exchanges and related terms.
Traditional Trading exchanges: Like a conventional stock exchange, these options allow buyers and sellers to trade based on the current market cap of the digital currency. Because a middle man is involved in traditional trading exchanges, a fee is charged for every transaction. The good part is that these options allow users to convert their fiat currency (Indian Rupees) into cryptocurrency (Bitcoin, Litecoin etc.) at current market price.
Decentralised trading exchanges: These exchanges offer direct peer-to-peer trading between sellers and buyers, but in this case seller sets his own exchange rate. Therefore, the current market price is not drawn in.
Cryptocurrency Funds: These are pools of cryptocurrency assets, managed by professionals, which allow public to buy or hold digital currency using the funds.
Cryptocurrency Brokers: These options allow you to buy cryptocurrencies at a price that is set by the broker himself, somewhat similar to a foreign exchange at an airport.

Decentralised Exchange

Decentralized exchange is believed to be the future of cryptocurrencies. Now you may wonder why!!! This exchange does not require any third party service to hold the customer’s funds, but the trading between the buyer and seller occurs through an automated process. This is also called peer-to-peer trading.

But what makes it different from a normal exchange?

The major difference between decentralised and a normal exchange is that you don’t require to trust the honesty or security of the exchange, as the funds are held by you in your personal wallet.
Moreover, in this exchange you need not to disclose your personal details, in a normal case. But if your exchange method involves a bank, then you might need to reveal our identity to the buyer or seller only. So, privacy is maintained in either case.
In addition to this, hosting in these exchanges is dispersed through nodes, so you need not to worry about the risk of server downtime.

And of course, there is a drawback to everything and decentralized exchange is no exception. First and foremost, it does not provide features like lending, margin trading or stop loss, unlike a normal exchange. It only allows basic currency exchange on a predetermined value. Secondly many decentralized exchanges require users to be online for various things like for an order to be listed or for signalling that the payment was received.

There is a long way to go. To build a fully functional decentralised exchange, it might take some more years of advancements and technology upgrades. However, the overwhelming need for decentralised services and the benefit of allowing users to control their funds has made decentralised exchanges a popular option, these days.

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