Exchanges are mediums through which cryptocurrencies are traded (bought or sold) . It is inevitable that a cryptocurrencies trader will want to sell his or coins at some point in time either to make more profit or to avoid loosing or loosing too much. Exchanges are of different types , the decentralized and centralized exchanges, and the choice of which exchange to use is dependent on the trader and his or her specifications or priorities.

Let us take a closer look at the types of exchanges mentioned above.

DECENTRALIZED EXCHANGE

This is the kind of cryptocurrency exchange that does not require a third party as it is a trade between the seller and buyer interacting directly . In this kind of exchanges , the trades are recorded in a ledger that is shared and regularly updated upon every transaction as it functions on blockchain technology .

A unique characteristic of this exchange is that you do not have to abide by the rules of a central body as everyone sets his or her own standards and conditions . Also, the traders are able to avoid paying operating charges or agent fees .

CENTRALIZED EXCHANGE :

This is the kind of exchange that requires a third party. The third party ; which is the exchange itself , helps to bring prospective cryptocurrency buyers and sellers together for the purpose of trade.

The centralized exchange is the most widely used exchange because of its accessibility and simplicity. Before a trader uses the centralized exchange , he or she is subjected to a verification process which gets basic data about the trader in other to keep the platform secure from fraudsters .

Let's look at some differences between a decentralized and a centralized under the following headings .

SECURITY :

One issue that is of great importance to traders is the issue of security . Both the centralized and decentralized exchanges are always at alert and constantly improving their security features but then the decentralized system is generally safer , and this is because it uses a blockchain technology which means information are stored on every node In the blockchain and not in a central server like in the centalized system.

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This alone makes it difficult for hackers to infiltrate the system because they will need to access the computers of everyone on the network which will be very difficult. A centralized system is prone to hacking as too much information is stored in a central server ,which means that once a hacker gets into that central server ,all the user information that were collected during verification and all the funds are at risk .

VERIFICATION AND REGULATION:

A decentralized exchange allows traders or peers to trade without proper verification or scrutiny .Which means there is not enough information about the traders using this platforms and this creates a safe heaven for Illegal fund transfer- like the bypass of international sanctions - , and also , it makes it very difficult for law enforcement to track or recover stollen funds .

So a kidnapper can create an account with a centralized exchange and get his or her required ransom on the cryptocurrency exchange without anyone being able to monitor or track the transaction . The centralized exchange on the other hand is well regulated and due diligence is Paramount as all the traders are registered and personal information are gotten and stored on the exchange platform.

This system makes use of the "know your customer " and " Anti - money laundry "protocols which is primarily to make the medium free from illegal trade which may attract government crackdowns.

COST OF OPERATION:

The centralized exchanges (CeX) charges traders for every transactions on their platforms such as buying and selling of coins ; the charges are dependent on the cryptocurrency in question. Do if you were trading hundreds of times a day the cost would not be nice .

A decentralized exchange (DeX) on the other hand is very cheap to operate as the traders most times pay no charge at all . That means if Ted intends to be involved in a lot of transactions per day, then he should use a decentralized exchange.

SIMPLICITY:

How simple it is to operate or use an exchange matters a lot in cryptocurrency trading. The centralized exchange is easier to use because the traders are brought together by the exchange ( the third party) and the rules are well laid out for traders , thereby reducing the complexities of setting individual rules .

Let us consider some best centralized exchanges of 2021. We will be looking at Binance and Coinbase .

(1)Binance :

This is the largest cryptocurrency exchange by volume of trade. It's the one of the best because of it's great features; like the peer to peer(P2P) feature, and its token , the Binance Coin(BNB) which can be traded traded at low charges and availability of lots of altcoins.

Bellow is a sample of a verified profile

(2) Coinbase:

This is also a centralized exchange . It is the most widely used cryptocurrency exchange in the US .It is well trusted by investors .coinbase is well recommended by Professionals for trading with Fiat money because of the high regulations it adheres to.

HOW DO I CREATE A METAMASK

WALLET ?

Step 1 : Download the Metamask app from your App store .

Step 2: Create a password and confirm the password.

Step 3: Some seed phrase will be shown to you. Write them down and produce them in the subsequent page.

Step 4: Now you can trade or swap between available tokens of your choice

HOW DO I USE THE UNISWAP EXCHANGE?

Bellow is a step by step guide on how to use the exchange.

Step 1: log on to the website (app.uniswap.org)

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Step 2: link the exchange to your wallet by clicking on "connect to a wallet"

Step 3: Go back to the website and Swap between available cryptocurrencies .