Types of Exchanges we know

[Jekbolt]

Hello crypto enthusiasts!

I have tried to find good single article or post with the list of existing types of exchange and failed. By reviewing many articles, I had drafted this topic because I believe other people also want to have that information.

The topic aims to summarize (with your help) all types of existing and upcoming crypto exchanges (or channels to trade digital assets) with their strengths and weaknesses.    Also please vote here to choose the most important traders' concerns: https://bitcointalk.org/index.php?topic=2939981.msg30196846#msg30196846. Then I'll gather all info into the one topic (here) and we all get useful thread and guide!

So, let's start.



1. Brokers (online & brick-and-mortar)
    
 Sometimes they are called market-makers. In some countries (e.g. Russia), it's a brick-and-mortar office -where clients can come, pay/take local fiat cash and get/give its bitcoins. The big weakness of such "windows" is high (in Moscow about 9%) spreads. For example, if Bitfinex shows you BTC/USD = 10 000 then the local exchanger ASK price will be 10 900.

     1.1. Strengths:
- clients can buy/sell high volume crypto stakes relatively quickly with no slippage.  
- easy to access
- low risks
- relatively high-speed of transaction
- fixed price (no slippage)

     1.2. Weaknesses:
- charge high (from +3% to +9% depending on the volume and residence country of a client) commissions comparing to the market price.



2. Centralized digital currency exchanges

So called DCE, they accept your fiat deposits and allow withdrawals. However there are centralized DCE with don't support fiat deposits/withdrawal, providing only crypto-to-crypto exchanging in the market. The limits, fees, complexity of depositing/withdrawing of fiat highly depends on clients and exchange registration locations.  
  
     2.1. Strengths:
- relatively low (0,1% to 0,3%) commissions for trading inside.
- no need to have a personal digital wallet to start trading
- the high speed of trading
- Sophisticated order placement process, availability of charting tools, etc.

     2.2. Weaknesses:
- Relatively high deposit and withdrawal fees, however not each exchange charge for it.
- high risk of losing clients' fiat funds (being hacked)
- high risk of sudden legal restrictions  
- hard to access due to the challenging validation process
- slippage can occur
- obligation to reveal your identity
  


3. Decentralized digital currency exchanges.

They usually doesn't require client to upload selfies with passport before trading, but they also don't accept fiat deposits/withdrawals (only crypto), which makes such type of exchanges quite complex for beginners.
    
     3.1. Strengths:
- low (0,1% to 0,2%) commissions for trading.
- the high speed of trading
- low risks
- the broad list of tradable altcoins
- simple validation (usually don't require to upload selfie with passport)

     3.2. Weaknesses:
- clients cannot access until you have a personal digital wallet with some coins
- clients cannot trade for fiat
- slippage can occur
- no decentralized exchanges with a fair volume
- quite complex for beginners
- Memory Pool of smart contract which support the exchange is open, so a cheater can put his block first (using higher rate of gas).



4. P2P or over-the-counter exchanges

They work as escrow agents by locking crypto-assets of a seller and releasing them to a buyer only after money acceptance confirmation.

    4.1. Strengths:
- low risks
- clients can trade locally for habitual fiat money, using suitable payment methods or globally
- clients can buy/sell directly (peer-to-peer) for the fixed prices; so no slippage

     4.2. Weaknesses:
- relatively high (0,5-1%) commissions for trading
- low speed of trading
- a short list of tradable cryptocurrencies
- clients must match peers’ advertisements and face awkward deal conditions. Lack of efficiency.



5. Non-executable brokers/platforms.
 
By using them, clients don’t deal directly with buying and selling Bitcoins but rather the purchasing of CFDs (Contract For Difference) or ETF on Bitcoin’s price. Another example is CBOE bitcoin futures.

    5.1. Strengths:
- low risks for funds to be stolen (only if a client choose a reputable broker/platform)
- simple to access and simple in taking money back
- low fees
- high margins

     5.2. Weaknesses:
- clients cannot actually buy Bitcoins (or other altcoins) through them
- hight margins (yes - it's also a weakness)
- high risks to get a margin call on price spikes and lose all deposit.



6. Cryptocurrency (mutual) Funds.

These are like MIF (Mutual Investment Funds) but with cryptocurrencies as basis assets. The clients can deposit their fiat to such fund or manager and take profit if basis crypto-assets are growing. A Fund alway takes its fees no matter would there a profit for clients or not.

     6.1. Strengths:
- low risks for funds to be stolen buy hackers
- simple to access and simple in taking money back (only if a client choose a reputable Fund)
- low fees

     6.2. Weaknesses:
- clients cannot actually buy Bitcoins (or other altcoins) through them
- a fund can collapse  



7.....




All are welcomed to add any new TYPE of exchanges (existing or upcoming) as well as any additional strengths/weaknesses, which I forgot to include.  

For example, to which type you address telegram apps/bots for trading, upcoming dark pool atomic swap exchanges?  

[1713558088]

1713558088

[1713558088]

1713558088

[BillCoin]

Cool Thread!
Would like to add few things to the existing types.

Brokers- Strength- you can buy a crypto backed etf( such as GBTC), so you are actually invest in crypto, but it would be much easier to convert the winnings into fiat, as taking money out of your broker account is much different from taking money out of a crypto exchange account, banks are most likely to accept that money.
Centralized Exchanges-Weakness- At most of the exchanges, you would need to reveal your identity for using the exchange, unlike at decentralized exchanges where you won't even need to reveal your name in order to use.

Decentralized Exchanges-Weakness- currently, there are no decentralized exchanges with a fair volume, so it's almost impossible to use one.

[Jekbolt]

Cool Thread!
Would like to add few things to the existing types.

Brokers- Strength- you can buy a crypto backed etf( such as GBTC), so you are actually invest in crypto, but it would be much easier to convert the winnings into fiat, as taking money out of your broker account is much different from taking money out of a crypto exchange account, banks are most likely to accept that money.
Centralized Exchanges-Weakness- At most of the exchanges, you would need to reveal your identity for using the exchange, unlike at decentralized exchanges where you won't even need to reveal your name in order to use.

Decentralized Exchanges-Weakness- currently, there are no decentralized exchanges with a fair volume, so it's almost impossible to use one.

Thanks for the comment!! Thanks to you I had added:
-     5. Non-executable brokers/platforms
- need to reveal your identity for Centralized Exchanges-Weakness
- no decentralized exchanges with a fair volume for Decentralized Exchanges-Weakness

But could you please explain what do you mean no fair volume (for decentralised exchanges)? Tell about some examples.

[Kramblerty]

Most of the Non-executable brokers are just a bet shops. 

[shahani]

These are questions talking about exchanges, from tokens up to real paper money, and hopefully that there is no hacker entered between the line. Because rampant hackers are entering between many exchanges transaction made.

[Jekbolt]

These are questions talking about exchanges, from tokens up to real paper money, and hopefully that there is no hacker entered between the line. Because rampant hackers are entering between many exchanges transaction made.

Can we say that centralised fiat exchanges are more vulnerable to hackers than P2P exchanges (where only clients' crypto-assets are stored in cold wallets ..out of the exchange)?

[Sendibere]

Can I add this 2 basically types of exchanges. The one is Local Exchanges that allow the users to buy and sell cryptocurrencies against local currencies. And the Cryptocurrency Funds, where the users can deposit their fund to a cryptocurrency trading company or manager and with a fee but they get benefits.

[Jekbolt]

Can I add this 2 basically types of exchanges. The one is Local Exchanges that allow the users to buy and sell cryptocurrencies against local currencies. And the Cryptocurrency Funds, where the users can deposit their fund to a cryptocurrency trading company or manager and with a fee but they get benefits.

Well,
- the Local Exchanges you are talking about relates to type 1. Brokers (online & brick-and-mortar). Sometimes they are called market-makers. In some countries (e.g. Russia), it's a brick-and-mortar office -where clients can come, pay/take local fiat cash and get/give its bitcoins. The big weakness of such "windows" is high (in Moscow about 9%) spreads. For example, if Bitfinex shows you BTC/USD = 10 000 then the local exchanger ASK price will be 10 900.

- Cryptocurrency funds look like #5. (Non-executable brokers/platforms) but let's say that such funds really buy crypto, then it's a new type indeed. I will enter it in the top post. Thanks!

\

[Jekbolt]

Nice article OP, you really did your best in writing this up. Well  for me, I have always prefer a decentralized exchange to a centralized one. I can't seems to be littering every exchange I intend to trade on with my identity. Though, KYC is good for security purpose but I won't even make the mistake of leaving my coins in an exchange for too long, cause no exchange can give you 100% security.

Thank you for merit by the way  !

Do you use any decentralised exchange now, which really does not require you to  upload selfie with passport before you could trade? If yes, please name it and I include this as a strength of decentralised exchanges. 

[hase0278]

Nice article OP, you really did your best in writing this up. Well  for me, I have always prefer a decentralized exchange to a centralized one. I can't seems to be littering every exchange I intend to trade on with my identity. Though, KYC is good for security purpose but I won't even make the mistake of leaving my coins in an exchange for too long, cause no exchange can give you 100% security.

Thank you for merit by the way  !

Do you use any decentralised exchange now, which really does not require you to  upload selfie with passport before you could trade? If yes, please name it and I include this as a strength of decentralised exchanges. 

As far as I know etherdelta is a decentralized exchange and it doesn't require one to upload selfies with passport before trading. Also, some good decentralized exchanges are wavesdex, open ledger dex, and crypto bridge dex running on bitshares network. You might want to check them out first before including it as a strength of decentralized exchanges, as you might find other weaknesses in the sites I have mentioned.

[Jekbolt]

Nice article OP, you really did your best in writing this up. Well  for me, I have always prefer a decentralized exchange to a centralized one. I can't seems to be littering every exchange I intend to trade on with my identity. Though, KYC is good for security purpose but I won't even make the mistake of leaving my coins in an exchange for too long, cause no exchange can give you 100% security.

Thank you for merit by the way  !

Do you use any decentralised exchange now, which really does not require you to  upload selfie with passport before you could trade? If yes, please name it and I include this as a strength of decentralised exchanges. 

As far as I know etherdelta is a decentralized exchange and it doesn't require one to upload selfies with passport before trading. Also, some good decentralized exchanges are wavesdex, open ledger dex, and crypto bridge dex running on bitshares network. You might want to check them out first before including it as a strength of decentralized exchanges, as you might find other weaknesses in the sites I have mentioned.

Thanks a lot!

 I had tried delta. It's Quite complex (weakness included) but true it had not requested selfie/passport/ - just MetaMask logging in (strength included).

[Kramblerty]

To which type of exchanges you would adress hitbtc?

[hase0278]

To which type of exchanges you would adress hitbtc?

As far as I know hitbtc is a centralized exchange since admins are the ones who process the transfer of funds and there are support team as well. Also, they are the ones who hold your funds unlike on etherdelta where the transactions happen on ethereum's blockchain itself. To know if an exchange is a centralized one or not, know if they are the ones(creators, owners of the site) who hold your funds when you deposit it to them.

[Jekbolt]

To which type of exchanges you would adress hitbtc?

As far as I know hitbtc is a centralized exchange since admins are the ones who process the transfer of funds and there are support team as well. Also, they are the ones who hold your funds unlike on etherdelta where the transactions happen on ethereum's blockchain itself. To know if an exchange is a centralized one or not, know if they are the ones(creators, owners of the site) who hold your funds when you deposit it to them.

Agree! include it into 1. Type (centralised exchanges).

Also one of the weaknesses of decentralised exchanges (which i included too) is an open Memory Pool of smart contract, which supports the exchange process. It allows a cheater (miner orany user of Ethereum chain) to put his block first (using higher rate of gas). For example, a cheater can put his bid/ask order first of the large stake buyer/seller.

[Kramblerty]

To which type of exchanges you would adress hitbtc?

As far as I know hitbtc is a centralized exchange since admins are the ones who process the transfer of funds and there are support team as well. Also, they are the ones who hold your funds unlike on etherdelta where the transactions happen on ethereum's blockchain itself. To know if an exchange is a centralized one or not, know if they are the ones(creators, owners of the site) who hold your funds when you deposit it to them.

Yes, there are a team and support and office I suppose. So the main feature of decentralize exchanges is no offline office at all.

[Jekbolt]

To which type of exchanges you would adress hitbtc?

As far as I know hitbtc is a centralized exchange since admins are the ones who process the transfer of funds and there are support team as well. Also, they are the ones who hold your funds unlike on etherdelta where the transactions happen on ethereum's blockchain itself. To know if an exchange is a centralized one or not, know if they are the ones(creators, owners of the site) who hold your funds when you deposit it to them.

Yes, there are a team and support and office I suppose. So the main feature of decentralize exchanges is no offline office at all.

Yes, and legal authorities can not come to that "office" and take all servers.

[Kramblerty]

Yes, there are a team and support and office I suppose. So the main feature of decentralize exchanges is no offline office at all.
[/quote]

Yes, and legal authorities can not come to that "office" and take all servers.
[/quote]

So, this is the best type of exchnges? Why then others still exsists?

[justin86]

3 is the best one, but centralized exchanges are leader in the industry for now, but in 2019 and 2020 there will be many decentralized exchanges like oax, they dominate the market.

[blue_nexus15]

I usually use the first way to trade in the market because it's safe. You also understand that transactions in this market are not managed so if you are cheated or stolen then you can not get it back. So I usually through broker to make transactions for my property, a little transaction fee is acceptable so I feel safe for my property.

[melamiras]

Hello crypto enthusiasts!

I have tried to find good single article or post with the list of existing types of exchange and failed. By reviewing many articles, I had drafted this topic because I believe other people also want to have that information.

The topic aims to summarize (with your help) all types of existing and upcoming crypto exchanges (or channels to trade digital assets) with their strengths and weaknesses.

So, let's start.



1. Brokers (online & brick-and-mortar)
    
 Sometimes they are called market-makers. In some countries (e.g. Russia), it's a brick-and-mortar office -where clients can come, pay/take local fiat cash and get/give its bitcoins. The big weakness of such "windows" is high (in Moscow about 9%) spreads. For example, if Bitfinex shows you BTC/USD = 10 000 then the local exchanger ASK price will be 10 900.

     1.1. Strengths:
- clients can buy/sell high volume crypto stakes relatively quickly with no slippage.  
- easy to access
- low risks
- relatively high-speed of transaction
- fixed price (no slippage)

     1.2. Weaknesses:
- charge high (from +3% to +9% depending on the volume and residence country of a client) commissions comparing to the market price.



2. Centralized digital currency exchanges

So called DCE, they accept your fiat deposits and allow withdrawals. However there are centralized DCE with don't support fiat deposits/withdrawal, providing only crypto-to-crypto exchanging in the market. The limits, fees, complexity of depositing/withdrawing of fiat highly depends on clients and exchange registration locations.  
  
     2.1. Strengths:
- relatively low (0,1% to 0,3%) commissions for trading inside.
- no need to have a personal digital wallet to start trading
- the high speed of trading
- Sophisticated order placement process, availability of charting tools, etc.

     2.2. Weaknesses:
- Relatively high deposit and withdrawal fees, however not each exchange charge for it.
- high risk of losing clients' fiat funds (being hacked)
- high risk of sudden legal restrictions  
- hard to access due to the challenging validation process
- slippage can occur
- obligation to reveal your identity
  


3. Decentralized digital currency exchanges.

They usually doesn't require client to upload selfies with passport before trading, but they also don't accept fiat deposits/withdrawals (only crypto), which makes such type of exchanges quite complex for beginners.
    
     3.1. Strengths:
- low (0,1% to 0,2%) commissions for trading.
- the high speed of trading
- low risks
- the broad list of tradable altcoins
- simple validation (usually don't require to upload selfie with passport)

     3.2. Weaknesses:
- clients cannot access until you have a personal digital wallet with some coins
- clients cannot trade for fiat
- slippage can occur
- no decentralized exchanges with a fair volume
- quite complex for beginners
- Memory Pool of smart contract which support the exchange is open, so a cheater can put his block first (using higher rate of gas).



4. P2P or over-the-counter exchanges

They work as escrow agents by locking crypto-assets of a seller and releasing them to a buyer only after money acceptance confirmation.

    4.1. Strengths:
- low risks
- clients can trade locally for habitual fiat money, using suitable payment methods or globally
- clients can buy/sell directly (peer-to-peer) for the fixed prices; so no slippage

     4.2. Weaknesses:
- relatively high (0,5-1%) commissions for trading
- low speed of trading
- a short list of tradable cryptocurrencies
- clients must match peers’ advertisements and face awkward deal conditions. Lack of efficiency.



5. Non-executable brokers/platforms.
 
By using them, clients don’t deal directly with buying and selling Bitcoins but rather the purchasing of CFDs (Contract For Difference) or ETF on Bitcoin’s price. Another example is CBOE bitcoin futures.

    5.1. Strengths:
- low risks for funds to be stolen (only if a client choose a reputable broker/platform)
- simple to access and simple in taking money back
- low fees
- high margins

     5.2. Weaknesses:
- clients cannot actually buy Bitcoins (or other altcoins) through them
- hight margins (yes - it's also a weakness)
- high risks to get a margin call on price spikes and lose all deposit.



6. Cryptocurrency (mutual) Funds.

These are like MIF (Mutual Investment Funds) but with cryptocurrencies as basis assets. The clients can deposit their fiat to such fund or manager and take profit if basis crypto-assets are growing. A Fund alway takes its fees no matter would there a profit for clients or not.

     6.1. Strengths:
- low risks for funds to be stolen buy hackers
- simple to access and simple in taking money back (only if a client choose a reputable Fund)
- low fees

     6.2. Weaknesses:
- clients cannot actually buy Bitcoins (or other altcoins) through them
- a fund can collapse  



7.....




All are welcomed to add any new TYPE of exchanges (existing or upcoming) as well as any additional strengths/weaknesses, which I forgot to include.  

For example, to which type you address telegram apps/bots for trading, upcoming dark pool atomic swap exchanges?  

There is a hybrid solution that is not fully centralised nor decentralised called DEX. It runs decentralised deposit and the user keeps the private keys, but the order pairing is centralised for speed.