Different Types of Altcoin Exchange

Centralised Altcoin Exchange

Most altcoin trades take place on centralised exchanges like Binance. These cryptocurrency exchanges have a centralised structure as they are controlled and operated by a company that acts as an intermediary between different users.

Centralised exchanges display the current prices of altcoins. When users create orders, they are collated in a central order book where buy orders are matched with sell orders. In this way, trades are facilitated, for which the crypto exchange typically charges a trading fee.

Major crypto exchanges tend to handle a large volume of trades which means there is high liquidity of altcoins and trades can be executed quickly. Centralised exchanges often offer other services such as asset custody. As centralised exchanges can be a target for hackers, the best crypto exchanges provide cutting-edge security and usually require customers to complete identity verification as part of their KYC requirements.

Decentralised Altcoin Exchanges

Decentralised exchanges (DEXs) aren’t run by a person or company as trades take place directly between users on a peer-to-peer marketplace with no intermediaries. There are no order books and you can only trade crypto—you can’t use fiat currencies.

DEXs run on a blockchain, like Ethereum, and transactions are facilitated by smart contracts. Prices are established algorithmically and trades are made against “liquidity pools”. Users can earn rewards by contributing their tokens to these pools.

DEXs are non-custodial so users can retain control over their altcoins and also keep their anonymity. They also tend to be harder to use, however, and the gas fees can be very high on some blockchains. Potential bugs in the smart contracts powering DEXs mean they could still be vulnerable to attack and users could lose tokens.

Peer-to-Peer Altcoin Exchanges

On peer-to-peer (P2P) platforms, trades take place directly between users without an intermediary, like on a DEX. Unlike a DEX, however, there are no liquidity pools. Purchasers instead choose a seller and send them fiat through a payment processor.

Buyers and sellers can use a centralised service to connect and funds are often held in escrow and only released once both parties have sent the agreed amount of money or tokens. Some centralised exchanges, such as Binance and OKX, also provide P2P platforms.

The benefits of peer-to-peer platforms are that there is often a greater choice of payment methods and users don’t necessarily have to provide any identification. There are also no fees or commissions, but as the seller sets the price, buyers won’t necessarily get the best deal. Users should be cautious of potential scams.

Altcoin Derivatives Exchanges

Unlike spot trading, which involves buying and selling the altcoins themselves, a derivatives exchange lets users speculate on the prices of altcoins by trading contracts that derive their value from the performance of the underlying asset.

A number of centralised exchanges, like Binance and OKX, offer the trading of crypto derivatives such as futures, perpetual swaps, and options.

Trading altcoin derivatives with leverage provides an opportunity to increase profits but it can also increase losses. Derivatives trading is more complicated than spot trading and should therefore only be conducted by traders with the right skills and experience. Some exchanges only offer derivatives to professional clients or users in certain countries.

Top 17 where to buy alt coins edit by Top Q&A

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