Centralized vs Decentralized vs Hybrid Exchanges
Almost every cryptocurrency user is attached to one crypto exchange or another. Exchanges represent a key sector of the crypto ecosystem. This is mainly because they represent the most available channel of transacting or extracting value from the industry. There are different kinds of cryptocurrency exchanges, depending on how they operate. This post is about making comparisons among the three categories of exchanges that we have today in the industry. That is: Centralized vs Decentralized vs Hybrid Exchanges.
Centralized Exchanges
This is the most popular type of exchange that exists in the cryptocurrency industry. Over 99% of crypto transactions today occur on centralized exchanges. Examples of this kind of exchange includes Binance, Bitterex, Coinbase and Poloniex.
The characteristics of centralized exchanges are listed as follows:
- High liquidity and trade volumes
- Quick transactions
- Supports multiple users at the same time
- Transactions are controlled by exchange operators
- User funds are deposited into exchange accounts before trading can occur
- Order execution is the responsibility of the exchange
- Users do not have access to private keys
- Prone to attacks from hackers and thieves
- Serves both as a trading platform and as a crypto storage platform
Decentralized Exchanges
The concept of decentralization simply revolves around the elimination of intermediaries. It provides for direct interaction between parties that are involved in a transaction. This makes the process relatively transparent and is also supposed to be cheaper in terms of the cost of processing.
Although there are exchanges today that aim to be decentralized, in the actual sense of it, even these ones possess some element of centralization. There is hardly any infrastructure in the industry today that provides for an absolutely decentralized exchange. Even those that operate a peer-to-peer system are hosted on centralized servers.
For the decentralized servers that we have in the industry today, the following features are common:
- Independent of intermediaries
- No central pool of funds
- Unbeatable by hackers
- Relatively low volume and liquidity
- Speed of transaction depends on participants
- Does not serve as a storage platform for users
Hybrid Exchanges
The above features of both centralized and decentralized exchanges provide for both individual strengths and weaknesses. Therefore, rather than focusing on the centralized vs decentralized vs hybrid exchanges comparisons, this system chooses a combining model. Incidentally, these strengths and weaknesses of centralized and decentralized exchanges occur in alternating and supplementary areas. Attempting to harness the strengths of both systems in a complementary arrangement is what has given rise to hybrid exchanges.
This category of exchange explores the liquidity, accessibility and speed of centralized exchange, with the security of the decentralized exchange. This is the kind of solution that Vertex.Market is offering its customers. A combination that satisfies every class of traders within the cryptocurrency marketplace, especially large institutional investors who want to be cautious in their dealings.
Hybrid exchanges focus on minimizing risk and maximizing opportunities within the ecosystem. On Vertex.Market, a peer-to-peer platform, volume and liquidity are exceptional. There are no off-market periods where trades stay pending. Rather trades are executed instantly between buyer and seller, with tokens sent directly to the buyer’s personal wallet once the seller confirms receipt of the funds. At the same time, you do not have to leave your funds on the exchange. They remain with you, in a system that demystifies the centralized vs decentralized vs hybrid exchanges comparison.
