As mentioned above, the most common model is a Centralised Exchange (CEX).
The main reason for this is that in order for an Exchange to sell cryptocurrency, customers need to deposit regular (fiat) money from a bank, credit card or e-wallet – all centralised and regulated financial services.
For this reason, the majority of exchanges are centralised, regulated businesses, with servers located in specific countries where they abide by the appropriate regulations for financial services. They have visible management teams and 24/7 customer service.
As already explained, using a CEX also means they custody (look after) your crypto until you decide to move the funds to a non custodial wallet.
For those unwilling to compromise there is another option the DEX (Decentralised Exchange).
As the name suggests, decentralised exchanges aren’t located in any one location and don’t follow a traditional account based approach.
Instead DEXs facilitate access to liquidity (buyers & sellers) via applications that themselves are just smart contracts, with no specific geographic location and therefore, can’t (right now) be subject to any set of regulations around things like KYC.
Using a DEX means you are not only responsible for custody of your funds, but there is a lot more you’ll need to understand in order to buy and sell.
Usability and complexity make DEX’s inappropriate for beginners but even more importantly a DEX is crypto-to-crypto only. If you are a crypto virgin your first purchase will involve you using a fiat payment method meaning a DEX is out of the question.
Leave a Reply