Advantages and disadvantages of centralized and decentralized bitcoin exchanges

You know that the number of bitcoin users is rising tremendously. There are a lot of new bitcoin exchanges coming into the market, which means now there is too much competition. It is also very complex to find the proper bitcoin exchange for future trading, investing, or to hold of bitcoins or other crypto coins. There are two types of bitcoin exchanges, centralized software bitcoin exchange and decentralized software bitcoin exchange that you can go with, and these different exchanges have different uses and features. When you search on Google for this phrase, “best bitcoin exchange,” you will see many ads on the first page because these new exchanges promote their services by giving special offers or services to the first users. There are also thousands of articles written on the best bitcoin exchanges. Still, in this guide, we will learn the benefits and demerits of using the centralized and decentralized bitcoin exchange, click here for more details.

What is a bitcoin exchange?

Bitcoin exchange is a platform on the internet that stores bitcoins for you and gives you the service to send and receive bitcoin with proper security. There are two categories of bitcoin exchanges: Decentralized software bitcoin exchanges and decentralized software. Centralized software exchange is an intermediate that provides additional features to the users to earn money or profit. But the decentralized software exchange is an open-source platform with no third party working behind it. The main motive of these wallets is to provide complete anonymity to their users.

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Pros of centralized bitcoin exchanges

There are the following positive and negative sides of using the third-party bitcoin exchanges given below:-

  1. The centralized bitcoin exchanges are personalized to the users because people always prefer the straightforward interface that the decentralized exchanges cannot provide. The most significant advantage of these third-party bitcoin exchanges is the very engaging user interface to understand things in detail.
  2. Since these bitcoin exchanges have an owner or manager or controllers, the customers will get support from their side. In addition, the users can contact the exchange using email, chat or call according to their contact service.
  3. You can add the funds to your bitcoin exchange using your fiat currency with many different methods such as Google Pay, Phone Pe, Net banking, NFT, PayPal, or other famous payment gateways in your country.
  4. It has multiple features such as the option of trading, long-term investment, analyzing the charts, search option, sending and receiving bitcoin options, different payment options, etc.

Cons of centralized bitcoin exchanges

There are the following opposing sides of the centralized bitcoin exchanges given below:-

  1. The fees for each transaction are very high because their main motive is to provide the services to make a profit from users.
  2. These exchanges will not give you private key access; otherwise, there will be no third parties’ use.
  3. They will get your identity information for using their features which means there is no complete privacy.
  4. Since the exchange is centralized, there are also the chances of security bugs or hacking.

Pros of decentralized exchanges

  1. You can customize the fees according to the transactional period, such as if you want to do an immediate transaction, you can increase the prices, and if you’re going to take time, you can decrease the amount of the cost.
  2. The security for the decentralized exchanges is very high because they are open source and hackers have to break all the developers’ systems to steal the impossible data.
  3. The decentralized exchange users have the full right to use their bitcoin wherever they want to spend without taking the other people’s consent because they have the private key, which means full ownership or control over funds.
  4. All the transactions done through these wallets help the users to hide their identity, which means complete privacy to the bitcoin users. 

Cons of decentralized exchanges

There are the following opposing sides of the decentralized bitcoin exchanges given below:-

  1. The user interface of these bitcoin exchanges is very tough to understand, and that is why people always go with the centralized software bitcoin exchanges. 
  2. This exchange does not provide domestic payment methods, which means you will get trouble buying or selling bitcoins on this exchange.
  3. Now, the people who want to make a profit in a short period are known as bitcoin traders. However, since these exchanges have no option to buy and sell, it is not suitable for traders.
  4. Purchase and selling options are not available, so there is also an issue of liquidity which means immediately converting the asset into cash.

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