Centralized exchanges are utilized by a customer on a server owned by a profit-oriented company that earns revenue from the platform’s fee system. They guarantee liquidity, offer a pleasant user experience thanks to easy-to-use interfaces, one click transactions and a wider diversity of customer services. Centralized exchanges can process orders and transactions fairly quickly and in some cases allow the exchange between cryptocurrencies and fiat (Khatwani, 2018 June). In return for trusting the administrator of a centralized system with the supervision of the exchange and the user’s assets, the responsibility held by the individual user is kept to a minimum. 1. Overview of Current Exchange Systems In the current exchange of cryptocurrencies, two fundamentally different systems are defining the market: centralized and decentralized exchanges, with the former one being more common (Dedi, 2018). However, the existence of an authority supervising the exchange on a centralized system stands in conflict with the widely acknowledged ideology of blockchain - creating a “trustless” environment where you can get rid of the middleman. An authority can set the rules for transactions and in case of server maintenance or crash, transactions discontinue and business opportunities might be missed. A centralized system might also be perceived as an easy target for hackers with ill intent (Aru, 2018). As the number of cryptocurrency traders increases the downsides of centralized exchanges raise concern.
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