The Different Types Of Blockchain Exchanges.

What Is a Blockchain Exchange?

Blockchain exchange is a cryptocurrency trading application that enables crypto holders to buy, sell, and swap crypto assets, there are two types of blockchain exchanges, eg: Centralized exchange, Decentralized exchange. 

Centralized exchanges(CEX) are regarded as Custodial blockchain applications with multiple options for crypto trading such as spot trading, margin trading, futures trading, Bitcoin and altcoin wallet staking option, fiat currency deposits gateway, and also peer-to-peer options which are regarded as P2P trading. centralized exchanges are the key factor to coin or token listing and also oversee “Initial Coin Offering(ICO).

To use a centralized exchange application users are required to register with a governmental Identity Card (ID) or an international passport, which is regarded as a Know Your Customer(KYC) application, this is necessary for any centralized exchange to legitimate customers’ identity, preventing legal risk and minimizing fraudulent activities. 

Decentralized exchanges(DEX) are trading web applications built on a non-custodial crypto wallet such as a metamask, trust wallet, etc, these exchanges only allow users to swap or trade tokens stored on the wallet depending on a particular blockchain network. For example, users can’t swap an Ethereum ERC-20 token for a Binance BEP-20 token on a decentralized exchange, liquidity mining staking, and farming is one of the beneficial options on a DEX, and there are no (KYC) applications requirements since it is built on a non-custodial wallet which is only controlled using private keywords.

There are new factions or applications built on decentralized exchanges which Are known as cross-chain trading and derivatives. The cross-chain application allows users to bridge a particular token from one blockchain to another. 

Risk Factors 

The risk type of exchanges is minimal. One of the common risks of exchanges is hacking exchanges; most especially decentralized exchanges are more vulnerable to hacking due to their open-open source code library. this might lead to asset loss or bankruptcy.

Decentralized exchange can also be hacked but this mostly affects only liquidity providers or stakes on the (DEX), it is always advised to have your token stored on a private wallet.