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Centralized exchanges (CEX)
A centralized exchange functions much like traditional brokerages or stock markets. The exchange is owned and operated by the centralized authority that maintains complete control over every account the ones account’s transactions. All transactions over a centralized exchange has to be approved by the exchange; this involves that most users get their trust in an exchange operators’ hands.




Advantages
Liquidity: Liquidity of your asset refers to being able to be sold without causing much price movement and minimum decrease of value. Liquidity is important for the utmost safety against market manipulation, like coordinated “pump-and-dump” schemes. Centralized exchanges are known to have greater liquidity than other types of exchanges.
Recovery possible: Most centralized exchanges provide benefit for being able to verify a users’ identity and recover access to their digital assets, if your user lose or misplace their login credentials.
Speed: Transaction speed matters for sure categories of cryptocurrency traders; it’s very important in high-frequency trading, where milliseconds count. According to an analysis by bitcoin.com, in accordance with other kinds of exchanges, centralized exchanges handle transactions faster, by having an average speed of 10 milliseconds.

Disadvantages
Honeypot for hackers: Centralized exchanges are accountable for immeasureable trades every day and store valuable user data across centralized servers. Hackers prefer on them other cryptocurrency trading platforms because of this alone – essentially the most notorious hacks have already been targeted at centralized exchanges, including Mt.GoX, BitFinex, and Cryptopia.
Manipulation: Certain centralized exchanges are already accused of manipulating trading volume, playing insider trading, and performing other acts of price manipulation.

Decentralized Exchanges (DEX)
Unlike centralized exchanges, decentralized exchanges (also called a DEX) behave as autonomous decentralized applications running on public distributed ledger infrastructure. They permit participants to trade cryptocurrency without a central authority.

Centralized exchanges are often exclusive to participants within certain jurisdictions, require licensing, and get participants to ensure their identity (KYC: “know your customer”). Compared, decentralized exchanges are fully autonomous, anonymous, and free of those same requirements. Several decentralized exchanges exist today, which we can easily categorize into three types: on-chain order books, off-chain order books, and automated market makers.

Advantages
Custody: You will find there’s famous saying in distributed ledger communities, “Not your keys, not your crypto.”: digital assets and cryptocurrencies are owned by whoever possesses the secrets to an account that holds those digital assets. As DEXs are decentralized, with out single entity owns them, users control their private keys along with their digital assets.
Security and privacy: Since users are certainly not necessary to experience KYC to make a forex account on the decentralized exchange, users can be well informed the privacy is preserved. Regarding security, most DEXs employ distributed hosting and take other security precautions, thereby minimizing the chance of attack and infiltration.
Trustless: A users’ funds and private data they are under their very own control, as nobody except a persons has access to that information.

Disadvantages
Low liquidity: Even top decentralized exchanges have trouble with liquidity for many digital assets – lower liquidity makes it easier to manipulate markets on a decentralized exchange.
Blockchain interoperability: Trading or swapping two digital assets that you can get about the same distributed ledger can be a easy procedure by using a DEX; trading two digital assets which exist on two different distributed ledgers can show incredibly challenging and need additional software or networks.

Hybrid Exchanges
A hybrid exchange combines the strengths of both centralized and decentralized exchanges. It facilitates the centralized matching of orders and decentralized storage of tokens – this means a hybrid exchange cannot control a users’ assets and contains no chance to avoid someone from withdrawing funds. Simultaneously, an easy centralized database manages order information and matching trades rather than using potentially slow blockchain infrastructure.

Advantages
Closed ecosystem: A hybrid exchange can be employed in a closed ecosystem. Organizations can tell with the privacy of their information while taking advantage of blockchain technology.
Privacy: Private blockchains are primarily employed for privacy-related use cases to acquire limiting communication with the public. A hybrid exchange can protect a company’s privacy while still and can talk to shareholders.

Disadvantages
Low Volume: Hybrid exchanges only have existed for a short moment. They don’t really yet have the necessary volume to become go-to platforms for choosing and selling digital assets. Low volume brings about a fairly easy target for price manipulation.


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