What is a Cryptocoin Exchange?

With all the buzz surrounding Bitcoin and cryptocurrency, it seems that we are moving closer and closer to a digital economy that is devoid of physical money. There are many different cryptocoin exchanges, that most people know as cryptocurrency exchanges.

They are the same thing, but some people know them as a 'cryptocoin exchange' so let's roll with that for the moment. In this post, I'll share with you some of the value points in different exchanges that I have used, and where I find that there are areas for improvement. Along with that, we will explore just what a cryptocoin exchange is, and what they are there to do for you.

Centralized Cryptocoin Exchanges

A Centralized cryptocoin exchange could be seen in something as popular as Binance or as small (or even smaller still) as Cryptopia. Be careful about sending money to any cryptocoin exchange that you are using for the first time.

There are some that seem to be big and reliable, like Yobit, but they are not as reputable as you might first believe. Do your own deep dive due diligence here too. After all, you are planning to send them your money!

What a centralized cryptocoin exchange does is they provide a means for you to sell one coin type for another, at a fee.

In the post Which cryptocurrency Trading Platforms To Use, I provided a breakdown of the variations in fees for moving your crypto off some exchanges, and even as far as moving your crypto back into fiat. There are fees at every corner you turn in crypto, so make sure your journey is an efficient one. The more times you go around in circles, the more costly it becomes.

There are pros and cons to a centralized cryptocoin exchange, like many other things online or in business. In my experience, these could be summed up as...

Pros	Cons
High volume of trade and liquidity improves the chance of trades being filled	The coins need to move from your wallet to the cryptocoin exchange where you don't control the private keys
More visually appealing and intuitive interfaces than a DEX which makes centralized cryptocoin exchanges easier to use	Higher risk of being hacked due to the centralized nature of the operation and the incentive for hacking the exchange
Secure log in processes (such as 2FA) are typically available	In the unfortunate event that you lose access to your 2FA keys or app, you are often stuck with regaining access to your accounts
Customer support is more accessible	Depending upon the home base for the exchange, the support may not be in your native language
Fee structures are typically easier to understand and calculate	Higher fees for trading and moving crypto when compared to a DEX
Higher number of coin listings and more chance of tested quality coins being available	Typically only more mainstream coins make it to the bigger centralized cryptocoin exchanges
Wider adoption at this point in time, which improves the ability to find tutorials and resources when you need help	Cryptocurrencies listed on centralized cryptocoin exchanges have already seen the pump from their listings take place

Decentralized Cryptocoin Exchanges

Decentralized cryptocoin exchanges, such as BitShares, Waves, and Bancor, also known as DEX in the crypto space, could well be the model that sees widespread adoption in the future. I would expect that this is the race we will see in 2019, which DEX is going to be the one to come out on top? With that having been said, there are more and more DEX ICOs coming out each week.

I would strongly caution any reader against jumping in on an ICO for which they have not done their own due diligence on. As you will see in this post, a DEX ICO I reviewed recently presented some concerns for my money. I anticipate that this is little more than a front for an exit scam.

The established DEX platforms which are out there and trading can seem a bit difficult to access, and they often feel clunky by comparison. I believe that once they work their way past these barriers, the rate of adoption will dramatically increase as people will see the value proposition they provide as more appealing than the current obstructions.

There are pros and cons to a decentralized cryptocoin exchange, which in my experience, these could be summed up as...

Pros	Cons
The coins do not need to move from your wallet to the cryptocoin exchange and you always control your private keys	Lower volumes of trade and liquidity can limit the chance of orders being filled
Lower level of risk of being hacked as there is no central point to attack on the DEX, as the DEX is on the blockchain	Not as visually appealing and intuitive as a centralized cryptocoin exchanges which can make a DEX harder to use
Secure log in processes (such as confirmation emails) are typically available	No access to 2FA as a layer of protection
Being on the blockchain, as long as there are users a DEX cannot be shut down	Customer support is much less accessible, if available at all
Much lower fees for trading and moving crypto when compared to a centralized cryptocoin exchange	Fee structures are at times more fluid, making them complicated and harder to understand and calculate
More emerging coins available that haven't yet been listed on the bigger centralized cryptocoin exchanges	Currently lower numbers of coin listings and reduced chance of finding tested quality coins
Cryptocurrencies listed on a DEX may not have yet seen the pump from their listings on larger exchanges take place	Lower level adoption at this point in time, which reduces the ability to find tutorials and resources when you need help

Security Considerations

This post is by no means inclusive of every aspect of what needs to be considered with the different exchanges and how they function. As a high-level overview, this post is intended to prompt you to dig deeper and learn more from other sources to validate what you have learned here. Never rely on just one source of information. Consider the voices of those who disagree with what is written here, and make up your own mind based on your own reasoning.

Before jumping in and snatching up a swag of Bitcoin, there are some things you need to know. This journey of education in such a new space compared to other forms of trading and more established markets can be fraught with dangers. Take the time to educate yourself before you take the plunge.

Cryptocoin exchanges at the end of the day are businesses, and they exist to make money for their owners. Treat them like you would any other online business, but keep in mind that they are not a bank and that you should never store your portfolio on their platforms if you do not control the private keys.

This bears repeating... Never leave your cryptocurrency on a cryptocoin exchange! Always use a more secure system such as a cold storage wallet like a Nano Ledger, or a Trezor hardware wallet. If you prefer to use a paper wallet, you'll be able to find approved generators on your chosen cryptocurrency website.

This article was recenty posted on my website TechMagy and shared here with the Steemit community to add value.