3 Different Types Of Cryptocurrency Exchanges: CEX, DEX, And Hybrid

Kiana Danial  |

Today I’d like to answer a question I get asked a lot by my investment students: What are the different types of Cryptocurrency Exchanges? A cryptocurrency exchange is a web-service that can help people exchange their cash money into cryptocurrencies and vice versa. Most exchanges are more focused on providing services to help you exchange a cryptocurrency such as Bitcoin, into other digital currencies like Ethereum, Litecoin, etc. There are currently three types of exchanges out there: centralized or CEX, decentralized or DEX, and hybrid. Read on to learn about each of them, their differences, and their pros and cons.

Different Types of Cryptocurrency Exchanges - Centralized CEX - Decentralized DEX - Hybrid

Also known as a CEX, centralized cryptocurrency exchanges are similar to traditional stock exchanges. The buyers and sellers come together and the exchange plays the role of a middle-man. In the crypto-world, “centralized” means to trust somebody else to handle your money. Among different types of cryptocurrency exchanges, one of the main issues with centralized cryptocurrency exchanges is their vulnerability to hacks.

This is how a centralized exchange typically works:

Most centralized crypto exchanges have crypto/crypto pairings. But not all of them provide fiat/crypto pairings.

For newbies who are trying out different types of cryptocurrency exchanges, it may make more sense to start at an exchange that offers fiat/crypto pairings. That’s precisely the reason why in 2017 and 2018 exchanges who provided this service became some of the most popular ones. However, you’d need to consider other characteristics of the exchange as well before choosing one.

At the time of writing, some of the most popular centralized different types of cryptocurrency exchanges that offer fiat/crypto pairings include:

Then we have centralized crypto exchanges that only provide crypto/crypto pairings. Some of the most popular ones at the time of writing include:

Next, we’ve got Decentralized cryptocurrency exchanges who aim to stay true to the pure philosophy behind the cryptocurrency industry. A DEX does not rely on a middle-man to hold your funds. It is a marketplace where buyers and seller come together and process the transactions directly between one another.

In other words, DEXs facilitate peer-to-peer trades. Decentralized cryptocurrency exchanges are harder to hack. However, on the flip side, you are more vulnerable to locking yourself out of your money. Other problems with DEXs may include low volumes and low liquidity due to lack of popularity at the moment.

Here are some of the most popular decentralized cryptocurrency exchanges as of 2018:

Finally, we’ve got Hybrid cryptocurrency exchanges, which are known to be the next generation crypto trading marketplace. They aim to merge the benefits from both centralized and decentralized exchanges. More specifically, hybrids seek to provide the functionality and liquidity of a CEX with the privacy and security of a DEX. Many believe such exchanges are the real future of cryptocurrency trading experience.

The first ever hybrid exchange was Qurrex, which launched in 2018. The Qurrex team got together in 2016, consisting of experts who had years of experience working in the forex markets, developers of trade terminals, and founders of successfully operating stock and futures exchanges. They all saw the significant potential in applying the best practices of the traditional exchanges to create a new generation of cryptocurrency exchange, providing a harmonious merge of centralized and decentralized elements.

In the comments below, let us know what type of an exchange you prefer and why.

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