Types of Exchanges

  1. Centralized Exchanges: run by a third party behave like current exchange that have a middleman who can give support and correct problems.
    • Examples: Binance, Coinbase, KuCoin, Kraken.
  2. Decentralized Exchanges: (DEX) Mimic traditional exchanges, but trading is handled using Smart Contracts and Automated Market-Making protocols.
    • Examples: Uniswap, Loopring, 1inch, PancakeSwap, SushiSwap.
  3. Cryptocurrency Brokers: do the selling/trading to/from the customer to broker.
  4. Direct Trading Platforms:
    • OTC (over the counter)
    • P2P (peer to peer)
    • These are the highest risk, you must do your own research on pricing.
    • Sellers set their exchange rate, and buyers find the sellers through the platform or denote the rate they are willing to pay, and the platform does the matching.
  5. OTC used by very large buyers (whales)
  6. P2P used by savvy users, but typically smaller transactions. In some regions of the world these are the only options.
    • Examples: LocalBitcoins.com or Binance.

Central Banks vs. DEX

Banks can roll back fiat transactions in special cases. For example, a bank can cancel a payment and refund the customer if a merchant charges the incorrect amount or accidentally double charges the customer.

In contrast, no central entity can undo transactions on public blockchains. It’s not possible to recover crypto that users send to the wrong crypto address.