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Centralised exchanges are a third party that handles transactions on behalf of users. They are also responsible for keeping records of the transactions and thus, require user details to be confirmed, typically through a KYC (Know-Your-Customer) or AML (Anti-Money-Laundering) form. This means that all transactions are managed by a central authority.
A centralised exchange typically handle both fiat and other cryptocurrency amounts. The primary purpose of an exchange is to allow users to trade from one currency or asset to another.
- Bittrex: Is a US based cryptocurrency exchange platform that allows individuals and businesses to buy and sell cryptocurrencies and digital tokens
- Coinbase: Headquartered in California, provides broker exchanges between Bitcoin, Bitcoin Cash, Ethereum, and Litecoin with fiat currency in 32 countries and Bitcoin transactions and storage in 190 countries
- Kraken: Is a US based exchange platform operating in Canada, EU, Japan and the USA. It is known as the world’s largest exchange of Euro’s for liquidity and volume
Centralised exchanges are known to be user-friendly with advanced features. They have a smoother navigation interface and also offer liquidity, meaning there are more buyers and sellers settling transactions faster than on decentralised exchanges.
Using centralised exchanges means you allow another party to manage your information and store currency on your behalf. This involves high risk in today’s world as hackers find centralised exchanges with central points of failure as primary targets. The following are the largest attacks on centralised organisations to date.
A classic example of hackers targeting centralised exchanges is DDoS attacks, overloading the exchanges’ servers with requests, causing too much traffic to process any transaction and hence crash their servers.
It is important to remember that centralised exchanges, though popular, are not as secure as a decentralised exchange and has historically been hacked. Centralised exchanges offer similar services as traditional banks, by overseeing the account on the behalf of the user. If you trust your money in a bank, you will likely trust your money with a centralised exchange. However, if you prefer to maintain complete control over your personal and private information, we recommend using a decentralised exchange such as, Blockbasis.