What is Centralized Cryptocurrency Exchange ?
Well if you know or are aware of the concept of Cryptocurrency and Banking, then grasping on the knowledge of Centralized Cryptocurrency is no big deal.
So, when we come across the term Centralized. The first thing that should spark in our mind is what Centralized actually means. Well conventionally if you look at the term ‘ Centralized ‘. It bascially means bringing a number of things under the control or authority of a single body.
And, similarly in the case of Centralized Cryptocurrency also it means the same thing. But, here to give it a more comprehensive meaning we need to add the word Exchange.
Thus, when we are speaking of Centralized Cryptocurrency Exchange. What it basically means is that there is a body which may hold full authority of your Cryptocurrency as normal banks hold your normal currency. It basically works on the same concept. The only difference is in this case we are only talking of different forms of cryptocurrency and a centralized body capable of holding these deifferent types of cryptocurrency.
And obviously since the body is a centralized body. It is a body which has been designed and maintained to trust. It can be seen as an online platform for trading and exchanging cryptocurrencies.
What is the role of Centralization in Cryptocurrency Exchange ?
Well the most important role of Centralization in case of Cryptocurrency that you will have a safe place to store your cryptocurreny or carry out transaction and exchange with other types of cryptocurrencies.
In some such Centralized Exchange institutions, you can also convert your crytocurrency into real cash or fiat. Also, you can buy crytocurrency with the help of fiat cash. The value however changes with the current market scenario of the crytocurrencies as that in case of normal currencies.
There are times when a cryptocurrency holder may forget or loose his or her private keys. In such cases, when there is a Centralized Exchange system present. Then, such situations can be avoided easily.
How does Centralized Cryptocurrency Exchange Works ?
Well, understanding how the Centalized Cryptocurrecy Exchange system works is no Rocket Science. It is based on the general concept of Banking system. So, if you have even the basic idea of how the banking system works and why is it important. You can pretty much understand the concept of Centralized Cryptocurrency Exchange as well.
To make you understand better let us look at the examples as displayed below.
As you can see from the above picture, there is a Centralized Bank or authority. This authoritative body takes your money and keeps good care of it. Also at times it provides you with a number of services such as Loan, Exchange, Interest and so on. It helps to keep your money and liquid assets safe and sound with it.
Now on the other hand when we talk about Centralized Cryptocurrency Exchange. We are basically repeating the same thing. But, in a complete digital and online platform.
It is a complete online platform as Cryptocurrency is such a form of currency that cannot be thouched or felt i.e. it is an untangible form of money. Thus, the term ‘ Complete online platform ‘.
So besides this discreet difference, the rest of the working is quite the same. As mentioned above, you can buy cryptocurrencies in these Cetralized Exchanges and also exchange cryptocurrencies with different cryptocurrencies and fiat oe real currencies.
How safe is Centralized Cryptocurrency Exchange to Decentralized Cryptocurrency Exchange ?
Well the main difference between a Centralized and Decentralized Cryptocurrency Exchange is the peer to peer transfer process. And as the term ‘ peer to peer ‘ suggests, there is no middle man to take care of transactions between two peers while exchanging currencies among them.
Cryptocurrencies are basically a decentralized currency by nature. Thus, making decentralized transaction very easy between two users or bodies.
Also in terms of safety, Decentralized Exchange system is much more reliable as the chances of being prone to hack is quite less than that in terms of Centralized Exchange. As in the past there has been quite a few incidents where such hacks has taken place against these Centralized Exchanges.
Thus, in the end to sum up everything a Centralized Cryptocurrency Exchange system may be defined as a digital or online platform where you can carry out cryptocurrency transactions and buy and sell such currencies with ease.
Thanks for reading.