A Bitcoin exchange may be similar to a stock exchange in some ways. However, cryptocurrency or Bitcoin exchanges will focus only or more on cryptocurrency tokens instead of stock trades. Basically, a Bitcoin exchange will offer a platform where the traders and the investors will look to buy and sell Bitcoin(s). They can also exchange the cryptocurrency in values calculated by using current market prices. Normally, Bitcoin exchange platforms will allow trades or transactions to take place either in the form of cryptocurrency to cryptocurrency transactions or local fiat to cryptocurrency transactions.
Different platforms will allow dealings of different assets that are relevant to the platform. Therefore, a Bitcoin exchange will allow and facilitate Bitcoin trading. There are some forex brokers that also list cryptocurrencies like Bitcoin as an asset. Many traders and investors work with low spread forex brokers as well. Spread size will be very little with low spread forex traders and this will prove to be very helpful for Bitcoin traders who use trading methods like scalping or day trading. It is important to note that not all forex brokers and platforms will facilitate Bitcoin trading, so make sure that you’re looking at the right options when choosing.
Ease for the customers might be the main focus of some cryptocurrency exchanges that offer a platform, some may want to offer competitive pricing and others might wish to provide customers with a platform that professional cryptocurrency traders would want to use. However, there are only three main types of cryptocurrency exchanges and we shall now discuss each one.
Centralised cryptocurrency exchange
These are traditional cryptocurrency exchange platforms that are governed by private companies which offer cryptocurrency or Bitcoin trading. These exchanges will require registration and follow the “know your client” rule. Even though centrally governed, these exchanges will offer high liquidity and high trade volumes.
Decentralised cryptocurrency exchange
A decentralized exchange will act as an alternative to a centralized exchange. Such cryptocurrency exchange platforms will not be dependent on a private company and the assets will be under the complete control of the customer. The Bitcoin or cryptocurrency transactions and the trades performed will be controlled by an automated process and there will be no central authority interfering. Trades performed will be considered as peer to peer or customer to customer.
Such decentralized exchanges use blockchain technology. These exchanges are designed and developed in such a way that they make sure the transactions are completely safe from any central authorities. Basically, the platform will provide their services in order to connect trade orders with one another. People who are looking to trade or exchange cryptocurrencies.
Hybrid cryptocurrency exchange
As the name suggests, a hybrid cryptocurrency exchange will be a combination of both decentralized and centralized exchanges. Such exchange platforms\ will try to take the best from both the platform concepts and aim to provide a trustless nature combined with fast transaction speeds and low latency.
A hybrid exchange will offer smart contracts to the customers in order to make sure that there is no government or central authority keeping an eye on any of their trades. This will also reduce risks and ensure the safety of the client’s cryptocurrency onto a blockchain instead of relying on a private company.
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Yuvraj Kore