Understanding Cryptocurrency Forks
February 12, 2025
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Cryptocurrencies are just like other financial assets. This means that they can also be bought and sold in financial markets. However, since they cannot be listed on regular financial markets, special markets have been created for trading them. These markets can be of two types viz. centralized and decentralized. In the previous article, we have already studied details about centralized exchanges. In this article, we will have a closer look at what decentralized crypto exchanges are and the pros and cons which they have to offer.
Decentralized exchanges are online platforms where users can trade cryptocurrency directly with other users. This means that the transactions happen using a peer-to-peer mechanism without having any central intermediary. The defining feature of a decentralized exchange is that crypto investors retain complete control over their funds. They do not have to hand over their funds to a centralized authority like they have to do in the case of a centralized exchange. This means that decentralized exchanges also do not act as custodians of the investor’s funds. Hence, they do not have any infrastructure or digital wallets to safely store the user’s funds.
Decentralized exchanges are quite popular amongst crypto investors. This is because they provide certain advantages. Some of these advantages have been listed below:
There are several disadvantages to using decentralized cryptocurrency exchanges. Some of these disadvantages have been explained below:
The fact of the matter is that both centralized and decentralized exchanges can be used to trade cryptocurrencies. Investors should weigh the factors important to them, compare the alternatives, and then make a final decision.
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