Buying and Selling
How to Buy and Sell Crypto Today
CEXs - Centralized Exchanges
What is a centralized exchange? By now you have probably seen advertisements for some of the largest exchanges which include, but not limited to, Binance, Coinbase, Gemini, FTX, Crypto.com, Kraken, and Voyager. The exchanges available to you will depend on your country of residence. For instance Binance, the largest exchange is not operating in USA. However, Binance.us is compliant with regulators as it currently stands and is there for allowed to operate. The features and products available between Binance and Binance.us will vary.
DEXs - Decentralized Exchanges.
What is a decentralized exchange? A proper DEX does not have a headquarters, CEO nor a central location or service used for servers and computation. Why do DEXs exist? In short, centralized exchanges or custodian services often have know-your-customer (KYC) or anti-money laundering (AML) requirements. Decentralized exchanges have been increasing in number and transaction volumes. Here is the definition of a DEX as seen by Ethereum.org. Here are some of the top DEXs that have integrated with the Ethereum ecosystem. DEXs are a way of equalizing the playing field for participants without geographical or regulatory limitations.
“I am a big proponent of decentralization. I think in our current world, power is too centralized and in the hands of the few, and needs to be more distributed” - CZ (CEO of Binance, the largest Centralized Exchange on Earth).
CZ, a person with extraordinary insight into the industry, sees the future becoming more decentralized. That is certainly interesting. It is equivalent to Tim Cook, the CEO of Apple saying the future is open-sourced (aka projects like Android).
How do DEXs work under the hood? Many DEXs use something called an Automated Market Maker (AMM) to provide and source liquidity for the exchange. The largest DEX is Uniswap and it employs the AMM technology to replace the traditional order book with liquidity pools that are pre-funded on-chain for both assets of the trading pair. To see the various trading pairs as well as see the rates earned by providing liquidity you can visit Uniswaps’s website here.
Most large DEXs are currently built on Ethereum.
Peer-To-Peer:
Peer-to-peer exchanges are like on and off-ramps to a highway. The Highway is bitcoin. The on and off-ramps are various national currencies. If you are a buyer or seller of Bitcoin but there are no large CEXs in your country then services like Paxful, LocalCryptos, or LocalBitcoins are a solid option. There are challenges with trading peer to peer but to state the obvious a challenging path is better than no path. There are not back-alley shady people using these products. These are for the most part honest, hard-working people who are embracing the future of finance in countries that need it most.
