5 Things To Look For In A Cryptocurrency Exchange (TIPS)
What are the criteria to choose a reputable cryptocurrency exchange? What's the difference between DEX & CEX? Should I use DEX or CEX?
When you want to buy Bitcoin or other cryptocurrencies like ETH, LINK, etc., the vast majority of you will go to the exchange, but how to choose a reputable cryptocurrency exchange to buy and sell? Based on what criteria to choose the most suitable floor? All will be answered by FoxCryptoNews in this article!
Classification of cryptocurrency exchanges
Cryptocurrency exchanges will be divided into 2 types:
- Centralized exchange, also known as CEX - Centralized Exchange.
- Decentralized exchange or DEX - Decentralized Exchange.
Centralized Exchange - CEX
A centralized exchange ( CEX ) is an exchange that is managed by a 3rd party , which can be a company or organization that owns the exchange. This 3rd party will stand in control and act as a bridge to exchange crypto assets, this means that every Crypto asset you deposit into your account on the exchange is managed and controlled by the company or organization.
To be able to perform transactions on CEX exchanges, you must create an account with ID, password and perform KYC to verify your identity carefully in accordance with government regulations.
- Good interface and user experience with many utilities and features, making it easy for new traders to use.
- Fast processing speed.
- High liquidity.
- Fast transaction speed.
- Must trust and depend on 3rd party.
- Must transfer money to the exchange wallet and the exchange will control 100% of your crypto assets.
Decentralized Exchange - DEX
A decentralized exchange (DEX) is a type of cryptocurrency exchange built and operated in a decentralized manner on the Blockchain platform . DEX allows trading to be done peer-to-peer on the Blockchain network without going through any intermediary organizations.
When trading on DEX exchanges, users can buy, sell and exchange coins right on their wallet without having to transfer to the exchange, all you need to do is import the wallet into the exchange, only if the user gives permission. the new transaction will take place. The private key of the wallet will be held by the user and no one else has access to it, including the exchange.
- Regardless of the 3rd party, you link the exchange with your own crypto wallet, so you have 100% control of your assets.
- Diverse Coin/Token, easier to list.
- Anonymous transactions.
- High transaction security.
- Low transaction fees.
- Transactions in state-provided legal currencies such as USD, British Pound, etc. are not allowed.
- Trading volume is not large.
- Low transaction rate.
- Low liquidity.
- There is no private key in the app.
- The risk level of the coins on the exchange is higher.
Difference between CEX and DEX
The difference between CEX and DEX is shown through 4 features in the summary table below:
Compare CEX and DEX
Minh will detail the difference between CEX and DEX:
CEX: The exchange will fully control the assets deposited in the exchange wallet, that is, the order book and custody of you are all controlled by the floor management .
DEX: Trade directly with other traders without going through a central server. There is no centralized 3rd party that owns the order book and custody. Therefore, the electronic asset is controlled by the brothers and the participants of the DEX .
CEX: Recently, new government regulations require CEX exchanges to comply with strict KYC (Know your customer) and AML (Anti Money Laundering) laws. Therefore, when trading on CEX, you need to partially verify your identity depending on the regulations of the exchange. For example, Binance will ask you to send your phone number, ID picture, etc.
DEX: Since there is no 3rd party on DEX, anonymous exchange is completely possible.
CEX: When you trade on a centralized exchange, all your transactions must be authenticated and authorized by the exchange . In a nutshell, CEX can be considered as an intermediary specialized in providing reliable cryptographic exchange services.
DEX: You trade completely based on a system consisting of many operating nodes, without depending on an intermediary .
Amount of assets
CEX: Projects that want to list tokens often have to pay a certain fee , which makes new projects sometimes not have enough budget to list the exchange. So it can be said that assets traded on CEX are usually less than DEX.
DEX: The project can list tokens for free, and does not require any formalities , so this is the easiest way for new projects to list tokens, helping users to trade as soon as possible.
05 criteria to choose a reputable cryptocurrency exchange
KYC & AML
KYC stands for Know Your Customer - Know Your Customer or Know Your Customer. This is the process of collecting identifying information related to the customer of a certain service. The basic information that is usually collected is a portrait, ID number, passport, address, etc. The purpose of the KYC process is to remove unqualified people from using a certain service. . With different units, these standards may be different.
AML stands for Anti Money Laundering - anti money laundering. Let's talk about money laundering first. Money laundering is the practice of concealing illegally earned money, in order to make the source of money "seem" legit. illegal activities such as corruption, smuggling, drugs, etc.
Different exchanges will comply with different laws and regulations. Some CEX exchanges have complicated and strict KYC and AML requirements, requiring participants to submit personal information about themselves during the account creation process.
The reason users need to care about this is because KYC will send information to the exchange. If the exchange is reputable, there is not much risk, but if you encounter a scam floor, this information will be sold to the outside and may affect users.
Learn more about the importance of KYC & AML as well as tips for easy KYC success now!
The reputation of the floor
Reputation here is shown through complaint settlement, deposit and withdrawal, etc. If the floor settles complaints late, or almost fails to protect the interests of users, then it is best not to put the exchange on the priority list. first.
In addition, you try to search on google is the platform you choose with the phrase "scam" to see if there are any complaints? Besides, you should also review the terms and conditions of each platform to see if there are any inappropriate elements.
However, for a newbie, the advice is that you should trade on reputable exchanges in the crypto community.
Liquidity is the buying and selling of large amounts of a cryptocurrency with no (or very little) impact on the price of that cryptocurrency.
The higher the trading volume, the more liquid trading for a coin/token pair. This helps you complete trades faster, easier and without having to deal with price fluctuations as much.
Another way to gauge the liquidity of an exchange is to check third-party websites that provide this type of data such as: Coin360, CoinMarketCap, CoinGecko and OnChainFX.
In new assets, DEX is usually more liquid than CEX. In addition, based on some specific characteristics, some asset classes will have very high liquidity in some specific DEXs.
For example, if you want to exchange one Stablecoin to another in large quantities, you can use Curve, because Curve is designed to create huge liquidity for Stablecoins.
Type of trading asset
Based on the asset you want to trade, you can go to CoinGecko or Coinmarketcap to choose a supporting exchange.
As mentioned above, if the asset is quite new and available in both CEX and DEX, I personally think you should choose DEX because of its high liquidity , the price will not fluctuate too much compared to the theoretical price.
User experience is very much related to the interface, the arrangement of features.
To choose a broker with a friendly experience, the best way is to participate in trial trading yourself, or see reviews from the community. Popular exchanges like Binance, Huobi, Uniswap, Sushiswap, etc. often give users a very good experience.
Top 5 reputable cryptocurrency exchanges
Reputable cryptocurrency exchanges include:
- 3 CEX exchanges: Binance, Huobi, OKEx.
- 2 DEX exchanges: UniSwap, SushiSwap.
Binance exchange is a top-tier exchange in current Crypto. At the top is CZ, who is quite influential, so the prestige is almost undisputed. In addition, Binance is also an exchange that has a lot of assets that are allowed to trade with quite high volume, so the price difference when trading large quantities is not much.
Besides spot trading, Binance also supports users to trade leveraged derivatives. In addition, in June 2021, Binance also started to support NFT trading, thereby becoming the first CEX exchange to support NFT market.
Advantages of Binance exchange:
- There are more than 1000 trading pairs available.
- Multi-language support, including Vietnamese.
- Bonus program up to 40% commission.
- Without KYC, you can withdraw up to 2 BTC/day.
- Vast cryptocurrency ecosystem.
- User Asset Protection Fund (referred to as SAFU).
- There are many types of transactions for you to skin in the game.
Disadvantages of Binance: Because it is a popular cryptocurrency exchange in the world, Binance is also a very high target for hacking attacks.
FoxCryptoNews has a detailed review article and instructions on how to buy, sell and use all features on the Binance exchange, you can refer to it.
Watch now: Binance Exchange Review and User Guide (2021)
Binance exchange interface
Huobi is one of the leading exchanges in China, whose trading volume is also in the top 4. Huobi currently has 3 domains, corresponding to different countries:
With more than 900 asset pairs being allowed to trade, Huobi is also the place of choice for many traders when they want to buy or sell tokens.
Advantages of Huobi floor:
- The founder has extensive operating experience on the exchange.
- Has high liquidity.
- Issued Huobi Token (HT).
- As an extremely potential trading platform, quickly developing Margin, Option, OTC, Futures,...
- Developed trading apps on iOS and Android.
- Vote Coin function on the exchange like Binance or Kucoin exchange.
- Multi-language support.
Disadvantages of Huobi exchange: The transaction fee is quite high.
Watch now: Review and guide to use Huobi exchange (2021)
Huobi floor interface
Standing above Huobi in terms of trading volume is Okex, another electronic exchange from China.
Similar to Binance, Huobi, Okex also have a lot of features such as trading spot, margin, farming, etc. In addition, Okex is also one of the rare exchanges that supports Parachain auctions on Kusama.
Advantages of OKEx floor:
- OKEx exchange supports many trading markets.
- Margin Trade of OKEx exchange offers x5 leverage.
- Vietnamese is one of 10 languages supported by OKEx.
- OKEx exchange has high volume and stable liquidity.
Disadvantages of OKEx floor:
- OKEx has many new products such as OK Pool, OK PiggyBank, but they don't focus on it.
- The exchange's mobile app is still in beta.
- The interface is not user-friendly.
- OKEx has a floor coin that is OKB, but has not been developed and completed.
- OKEx's products are diverse but also mass-produced.
- OKEx user's account was hacked.
Watch now: Evaluation and instructions for using OKEx exchange (2021)
Auction Parachain on Kusama at Okex exchange
Uniswap is one of the first DEXs to appear in Crypto. The reputation of the exchange is shown through many projects learning and forking other DEXs. In addition, large trading volume and liquidity are also strengths of Uniswap.
Uniswap currently has 3 versions, in which, the most used is Uniswap V2. With the launch of Uniswap V3, Uniswap enables users to maximize capital efficiency by concentrating liquidity.
Advantages of Uniswap floor:
- Swap ERC20 Tokens quickly and easily.
- Users can contribute to liquidity pools for any ERC20 Token and get a commission in the form of Fee Swap.
Disadvantages of Uniswap: High transaction fees.
Watch now: Uniswap floor review and user guide (2021)
Uniswap floor interface
Initially, Sushiswap was just one of dozens of fork projects out of Uniswap. Similar to the copy projects, SUSHI had a bad time because users farmed out easily and sold out.
It was the end of 2020, early 2021. But now, Sushiswap has really become a big force, comparable to Uniswap, if not superior at times in some aspects.
Currently, Sushiswap has many products besides normal transactions, such as IDO platform, Lending, Borrowing, ...
Watch now: Reviews and instructions for using SushiSwap (2021)
The transaction interface of Sushiswap
Should buy and sell Bitcoin & cryptocurrencies on CEX or DEX?
Buy and sell Bitcoins
Bitcoin is not currently supported by DEX, so you can only buy BTC through CEX.
Because Bitcoin is a very basic asset in Crypto, every CEX supports you to buy and sell. If buying with a very large amount, you can choose top-tier exchanges like Binance to buy and sell for liquidity.
Buy and sell cryptocurrencies
If you are a new trader, my advice is that you should use CEX because the interface is forgettable, easy to use and has Vietnamese support in some major exchanges like Binance.
However, with the disadvantage that some new tokens are illiquid, and often cannot be traded on CEX, so in these cases, DEX must be used.
DEXs like Uniswap or Sushiswap usually have better liquidity for new tokens, so transactions won't be skewed much. And even, these tokens do not have enough CEX listing fees, so users can only trade through the DEX.
In short, no floor is better than another, but depending on what you want to use it for, you will rely on the above characteristics to choose CEX or DEX for convenient trading.
Thus, FoxCryptoNews introduced him to the 5 most reputable cryptocurrency exchanges, and provided the necessary information about the types of exchanges on the Crypto market.
Have you used any of the above decks? How is your experience and evaluation? Any other cryptocurrency exchanges that you would recommend? Please comment below to let FoxCryptoNews know!
Sep 29, 2022