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Having many choices can be joyful but can also give you agony since things to consider increase. It definitely emerges you from the headache if you can get your hands on some data comparing the choices. The types of cryptocurrency exchanges are unparalleled and varied in comparison to traditional stock, bond and commodity exchanges. Therefore, traders should choose the best exchange after comparing the traits of exchanges. This post covers everything from the changes in cryptocurrency exchanges to the aspects of each exchange and the most advanced model, the perpetual contract exchange.
Centralized exchanges are similar to traditional stock exchanges. Transactions happen 24 hours a day, 365 days a year, with no opening or closing times, and traders gather and buy assets in one service.
High volume and stable systems are some of the advantages of a centralized exchange. These advantages are not systemic characteristics of 'centralization', however. They arise from a relatively longer history than other exchange types. On the other hand, centralized exchanges are vulnerable to security because they manage investors' assets and personal information by themselves. Starting from the Mountain Gox hacking incident in 2014 where over 850,000 Bitcoins were lost, damages continuously occur to exchanges worldwide.
A decentralized exchange has emerged as an alternative to solving the security problems of existing centralized exchanges. In the decentralized exchange (or DEX in short), as the name suggests, cryptocurrency asset trading is not centralized, and the exchange only provides space for traders to gather. And trading of cryptocurrency assets is done through smart contracts between traders.
Decentralized exchanges can also attempt to hack individual traders' wallets, but even if the attack is successful, the damage is limited to the individual, not the entire traders. It is also superior to the centralized exchange in terms of anonymity. Since the actual transaction is between two traders who trade, the exchange does not require a strict level of personal authentication from the trader. However, the movement of assets within the decentralized exchange is done through the blockchain, so the transaction speed is slow. Also, there are additional fees for all transactions. Primarily caused by these downsides, the low volume is another problem that decentralized exchanges must overcome.
In an attempt to complement the pros and cons of centralized exchanges and decentralized exchanges, convergent exchanges emerged. The converged exchange has the flexibility of a centralized exchange and the security of a decentralized exchange. Transactions are managed by a centralized order book, but cryptocurrency assets are moved directly from wallet to wallet of each trader without the need to deposit in the exchange wallet. The vision pursued by the convergence exchange is ideal, but it is still a minor player in the market.
Perpetual Contract Exchanges
Unlike the previous three types of exchanges, perpetual contract exchanges are differentiated in the products they deal with, not the core technology. MCS is also a perpetual contract exchange.
According to Bloomberg, 50% of the total cryptocurrency trading volume comes from futures trading. This was positive in terms of increasing the liquidity of Bitcoin and expanding the investment base. In fact, ICE (Intercontinental Exchange), the world's largest stock exchange company, founded the Bitcoin Futures Exchange, and the cryptocurrency futures market is growing at around 3 billion USD on a day.
In technical terms, perpetual contract exchanges are not much different from spot exchanges. In addition, trading in perpetual contract exchanges can also generate profits in a bear market. On the other hand, there are places where overload occurs due to high trading volume, but MCS, in particular, protects traders by not only improving speed but also blocking the occurrence of minimal errors when calculating the value.
Cryptocurrency exchanges are absorbing the strengths of the existing financial market, embracing new technologies and making rapid progress. We hope that this post will serve as an indicator when choosing an exchange, and traders are encouraged to grasp the platform's features and strengths and weaknesses to make wise decisions.
Traders ALWAYS come first on MCS.
Traders always come first on MCS.
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