For most people living in the U.S. their first exposure to cryptocurrency will be through a centralized wallet or exchange. These online wallets and exchanges big advantage is their ability to function as a fiat on-ramp and off-ramp.
Centralized cryptocurrency exchanges and wallets are online platforms used to buy and sell cryptocurrencies. They are the most common means that investors use to buy and sell cryptocurrency assets. And, like their counterpart, decentralized wallets, they allow you to Store, Send, and Receive cryptocurrency assets.
However, unlike decentralized exchanges, when buying, selling, or trading you are not doing peer-to-peer transactions. All transactions go through a third-party intermediary to verify and secure transactions. When using a centralized exchange, you are required to submit KYC/AML (Know Your Customer & Anti-Money Laundering) information. In other words, you must give up your personal information, and all your transactions are tracked.
And when using a centralized exchange and/or app, you’re not in full custody of your crypto. In fact, you never receive your private keys when using a centralized wallet. If you try to go into your Coinbase, Gemini, or Crypto.com account, you’ll notice there are no private keys associate with it. There are also larger fee’s when using most centralized exchanges and their wallets.
Finally, centralized exchanges can turn your account on or off at their pleasure. Remember the Game Stop / Robinhood fiasco? Where Robinhood suspended trading. Well, the major centralized crypto exchanges have that same power, and they have been known to use it.
However, when all is said and done the centralized exchanges offer one feature that their decentralized counterparts simply don’t, fiat-on and off ramps. Converting your crypto to cash.
So, in closing, if you don’t mind having your crypto custodied, and need a vehicle to do crypto-to-cash conversions, then a centralized wallet and exchange is for you. I have one centralized wallet and use it weekly to purchase and convert crypto to cash if necessary. But once I’ve purchased my crypto, if not converting then I immediately move it to my hardware wallet, which I will discuss in the final segment of this (3) part op-ed.
Here are (3) of the top centralized exchanges:
Author: Majeed A. Kariem, CBP
C4-Certified Bitcoin Professional | President, Blockchain Merchants Assoc.
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