When digital currencies first appeared, there weren’t that many places where people could purchase them.
Early crypto enthusiasts could get their hands on coins by mining them or via peer-to-peer transactions on crypto forums.
14 years and nearly 22,000 coins later, numerous top crypto exchanges like Binance give people the opportunity to buy Ethereum, Bitcoin, and any other relevant crypto asset on the market with ease, ensuring accessibility and lowering barriers to entry.
The rapid rise of the cryptocurrency industry and the growing popularity of crypto assets has led to the emergence of an increasing number of crypto exchanges, which one can say are a dime a dozen these days.
These web-based platforms allow retail and institutional traders and investors to purchase, store, and sell crypto assets safely and effectively with as little effort as possible.
However, with new exchanges appearing all the time, it comes as no surprise there are notable differences between them.
From a customer’s perspective, the variety of options provides convenience but also makes the decision process a lot more difficult.
From a provider’s perspective, it can be rather challenging to launch a crypto exchange and make it stand out from all the others.
Both parties can benefit from identifying the features that guarantee the success and reliance of a crypto exchange platform and thus ensure an optimum experience for users and greater profit for providers.
Table of Contents
The Different Categories of Crypto Exchanges
We need to start by explaining that crypto exchange platforms can be separated into three main categories: centralized, decentralized, and hybrid. So, let’s take a look at how they differ from one another.
Much like traditional stock exchanges, centralized crypto exchanges or CEX are run by a central authority that facilitates and oversees all the activity that takes place on the platform.
In other words, these exchanges act like a middle-man between sellers and buyers, so users have to trust them with the safekeeping of their assets.
Most CEX platforms provide both crypto/crypto and fiat/crypto pairings and they also have easy-to-use interfaces which makes them perfect for beginners.
Unfortunately, they are also more susceptible to security risks such as hacking, theft, and fraud.
Unlike the first category, decentralized crypto exchanges, also known as DEX, don’t rely on a third party to keep users’ funds safe and conduct transactions.
Instead, they use blockchain technology and smart contract functionality to make peer-to-peer trading possible.
This means that buyers and sellers interact directly with each other when arranging a transaction.
DEX platforms are less likely to be hacked, but they are also less user-friendly, can experience liquidity issues, and may incur higher fees.
The last category, hybrid crypto exchanges, promises to provide the best of both worlds by bringing the benefits of CEX and DEX platforms together, namely enhanced safety, user-friendliness, higher liquidity, and greater user control over crypto assets.
Due to the numerous advantages they offer, many believe hybrid exchanges to be the future of crypto trading.
Essential Features of a Highly Effective Crypto Exchange
There are a few key features that all platforms require in order to provide an optimum level of functionality. They can make the difference between a successful exchange platform and an average one.
So, here are the characteristics that developers have to focus on when building an exchange platform and users have to look for when choosing a reliable crypto exchange.
High-Performance Trading Engine
The trading engine represents the heart of any exchange platform.
It’s the component that is tasked with facilitating price discovery, matching buy and sell orders, and enabling the rapid execution of crypto transactions.
Therefore, it’s safe to say that a crypto exchange is only as efficient as its trading engine.
A Customizable Admin Panel
The admin console is a centralized dashboard that makes it easy for exchange operators to manage and control a variety of functions and features on their platform.
Beyond basic features like managing crypto listings, adding new coins, addressing support-related issues, or setting trading fees, these admin consoles can be tailored to adapt to each platform’s requirements and meet users’ specific needs.
User Authorization and Verification
The authorization and verification processes are a prerequisite for ensuring a safe and smooth trading experience for all users.
Developers should focus on making these steps as efficient as possible and at the same time keep them simple so users don’t have to put too much effort into it.
Crypto Wallet
Crypto wallets are also an integral part of exchange platforms and they provide a place for users to store their assets.
Crypto exchanges can offer hot wallets which store cryptocurrencies online and ensure greater convenience, or cold wallets which are not connected to the internet and are therefore safer.
Analytics
Making trading decisions is not an easy task, which is why crypto exchanges should include various analytics tools that allow users to assess their trading options by tracking different technical indicators like the Relative Strength Index, Moving Average, Moving Average Convergence Divergence, or Stochastic RSI (StochRSI).
This should make the decision process a bit smoother and enhance the trading experience.
Currency availability
As we’ve already mentioned, there are over 22,000 crypto coins out there, but they’re not all active or valuable.
A crypto exchange should provide a comprehensive collection of crypto assets that are functional and relevant on the market.
Push notifications
Push notifications are a great way for exchange platforms to keep users in the loop with the latest updates on crypto trends, and provide them with useful information such as coins listings or special offers that can guide them on their trading journey.
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Wrapping up
Crypto exchanges are bringing the ever-expanding world of crypto assets to users’ fingertips and making crypto trading easier and more convenient than ever before.
However, since not all exchanges are created equal, developers and users need to be aware of the features that ensure an above-average trading experience.
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