Learn Cryptocurrency
24 Apr 2021

Pros and Cons of Centralized Cryptocurrency Exchanges for First-Time Investors

Farheen Shaikh

If you are one of the newcomers to crypto and trying to figure out from where you can buy your first crypto, then you are at the right place. 

Apart from just buying it from somebody, you know who has cryptocurrencies. You can leverage the power of exchanges to connect with buyers and sellers. Cryptocurrency Exchanges are where buyers and sellers get together to perform crypto trades almost instantaneously.

There Are Two Types of Exchanges:

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1. Centralised Exchanges

Centralized cryptocurrency exchanges are third parties involved in monitoring and facilitating the buy-sell transaction between interested parties. These exchanges not only help transact but also allows you to store cryptocurrencies on the exchange.

They require investors interested in making a transaction to submit their personal information, though depending on their respective policies, some exchanges allow investors to remain anonymous.

2. Decentralised Exchanges

There is no third party involved in decentralized cryptocurrency exchanges to facilitate or monitor transaction security. All transactions are peer-to-peer and do not require interested parties to share any personal information.

Difference Between Centralized Vs Decentralized Crypto Exchanges?

Though centralised and decentralized exchanges both are just market places for you to buy or sell cryptocurrencies, their core functionality of centralization and decentralization enables the following differences.

1. Liquidity

Currently, centralized exchanges rank higher on popularity among investors, which invariably affects the liquidity and time taken to fulfil orders. Since there are many buyers and sellers on centralized exchanges, it allows for faster order matching and higher liquidity.

On the other hand, decentralized exchanges have comparatively lower liquidity since they have fewer buyers and sellers on the platform.

2. Charges

Centralized cryptocurrency exchanges may or may not charge a small fee to their customers for services. In contrast, Decentralized exchanges have minimal to zero charges.

3. Security

Decentralized exchanges have higher security than centralized platforms, where the main threat is from hackers. Where wallets that hold one’s cryptocurrencies or the accounts with the exchanges are vulnerable, it is usually advised that given an option by the exchanges, customers may transfer their holdings to private wallets after transactions and take basic online security measures.

Even among centralized exchanges, some have better security measures than others, making the threat of hackers a far less likely event.

Why a Centralized Exchange Might Be Better?

For novice investors, centralized exchanges help manoeuvre the complexity of a cryptocurrency transaction. The involvement of a third party to oversee and facilitate a buy-sell transaction gives the impression of a trustworthy investment environment and lends investors’ confidence when trading in alternative investments such as cryptocurrencies.

Why CoinSwitch Kuber?

Beyond centralized exchanges lie cryptocurrency exchange aggregators such as CoinSwitch Kuber that partner with several exchanges and wallet services so that investors don’t have to go through multiple exchanges looking for the best trading rates.

CoinSwitch Kuber facilitates trades in over 100+ cryptocurrencies with Indian rupees. The advantage of a cryptocurrency exchange aggregator like CoinSwitch Kuber is that it pools liquidity from the largest, most popular cryptocurrency exchanges helping investors get the best rates on any trade. 

These trades can be between two cryptocurrencies or a cryptocurrency-INR trade, for example.

We essentially facilitate ease in cryptocurrency trading. Since investors can view rates for a particular cryptocurrency pair from across exchanges while they trade and hold on a single platform. It helps beginners ease into the habit of trading in a complex asset class such as cryptocurrencies.

It could sometimes be overwhelming for beginners to invest in an asset class like cryptocurrencies that have gained wide attention in a brief span. Hence we equip you with features on the platform like the price chart, limit order etc. The liquidity on the platform also helps facilitate faster trades, thereby lowering the volatility or fluctuations around market rates.

Bottom Line

The benefit of having a third party involvement in facilitating transactions on platforms like CoinSwitch means investors can have access to a dedicated support team to help them in the process.

Investors at the beginning of their investment journey typically lack the confidence to explore a concept like cryptocurrencies. This could be for several reasons, including that the concept is a relatively new one compared to some other traditional financial investment avenues. We usually tend to fear that which we do not know of.

Thus we help investors ease into the environment of cryptocurrency trading by providing you with a sense of security, ease of trading from a single feature-rich platform, and reaping the benefits of higher liquidity, including faster transactions at attractive rates.

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.


Farheen Shaikh

Content Writer

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