Crypto exchanges are a core part of the crypto economy because they provide a place where buyers and sellers can meet to exchange digital assets for fiat money or other cryptocurrencies. In addition, these platforms serve as a gateway for investors new to the digital currency market or who prefer not to trade on major stock exchanges like Coinbase or Binance.
How Crypto Exchanges Work
Crypto exchanges work like traditional stock brokerage firms because users can deposit fiat currency (such as U.S. dollars) and purchase cryptocurrencies. Users can also trade their cryptocurrencies for other coins and tokens or earn interest on assets held within the exchange account.
Types of Crypto Exchanges
The two most common types of exchanges that facilitates peer-to-peer transactions between buyers and sellers are;
- Centralized Exchanges
- Decentralized Exchanges
Centralized exchanges function similarly to how stock exchanges operate today — they match buyers and sellers while also managing accounts, order books, and trades within an internal ledger system (or pairwise trading).
Decentralized exchanges are more like traditional peer-to-peer systems; they allow counterparties to interact directly with one another without a third party like a broker or bank.
What to Look For When Choosing the Best Crypto Exchanges
Statistically, there are more than 500 overall crypto exchanges in the world. Looking for the best crypto exchanges can be tedious and since the crypto space has many cons amidst the pros, security should be your priority. To look for the best crypto exchanges, you need to consider the following:
When choosing an exchange, you want to ensure it is secure. Look for exchanges with strong security measures in place such as, 2-factor authentication for withdrawals and a cold storage option where your funds are not on the internet.
Exchanges charge different fees depending on which features you use. For example, some exchanges charge transaction fees for buying or selling cryptocurrencies, while others charge withdrawal fees only when you move money out of the platform. Some exchanges don’t charge any fees at all!
If you want to buy Bitcoin, for example, with USD or EUR, this is easy since they are available on most exchanges worldwide. But suppose you want to buy other coins like Litecoin or Monero; in that case, there are fewer options available as most exchanges only support Bitcoin and Ethereum right now, so it may be easier to use an exchange that lists both of these coins and others such as Litecoin or Monero.
Best Crypto Exchanges in 2022
We have gathered these exchanges with their overview, why we picked them out and highlighted their pros and cons here.
1. Binance
Why We Picked It Out
We chose Binance because it is a highly advanced cryptocurrency exchange with a steep learning curve. It’s geared toward more experienced traders and lets you trade hundreds of different currencies.
The site is a little uneasy to navigate, but it’s not hard to figure out if you’re familiar with cryptocurrency exchanges.
Binance has a wide range of coins available for trading, including some of the largest cryptos in the world like Bitcoin and Ethereum and many smaller ones.
Pros and Cons
Pros
- Low transaction fees
- Deposit available with bank cards
- It supports over 400 coins
- It requires less than 15 min to open an account
Cons
- Not available in the U.S.
- Steeps in account verification
- Difficult to navigate for amateur crypto enthusiasts
Overview
Binance is the world’s largest cryptocurrency exchange, handling over $1 billion worth of transactions daily. The founder, Changpeng Zhao, is a developer who had previously created high-frequency trading softwares.
In March 2018, Binance announced that they would be launching their blockchain called Binance Chain, which will allow users to create their tokens on top of it. They also stated that they would be running all decentralized exchanges on their network and paying fees with their native coin, BNB, which would give them an advantage over other exchanges when trading cryptocurrencies.
2. Coinbase
Why We Picked It Out
We recommend Coinbase for new crypto enthusiasts. It has a large selection of cryptocurrencies and a high level of security. In addition to being beginner-friendly, Coinbase also provides an advanced trading platform—Coinbase Pro—making it a good option for experienced traders.
Pros and Cons
Pros
- It supports over 100 cryptocurrencies
- It has different platforms for beginners and advanced traders
- Available in more than 100 countries
- Top security
Cons
- You do not control private keys
- It supports famous coins only
Overview
Coinbase was founded by Brian Armstrong and Fred Ehrsam in San Francisco, California, in 2012 as part of Y Combinator’s Summer 2011 batch. The company received $5 million as part of its Series A funding round from Andreessen Horowitz (a16z), Union Square Ventures (USV) and Ribbit Capital in 2013. In 2016, Coinbase raised $100 million from IVP at a valuation of $1.6 billion while the company was still operating as a cryptocurrency wallet provider only, not yet as an exchange service provider.
Coinbase is registered to be insured by the Federal Deposit Insurance Corporation (FDIC), so your digital assets are protected. It also offers several ways to fund your account, including ACH and wire transfers.
3. Gemini
Why We Picked It Out
Gemini has robust security protocols and insures user funds, which helps to protect investors from hacks and theft. The company is also SOC 2-certified, which means that it has passed an independent audit of its information security controls and compliance procedures performed by an outside auditor.
Gemini’s security measures include:
Two-factor authentication (2FA) on all accounts with a minimum of 6 characters in length, including numbers and special characters.
I.P. whitelisting: Only allow trading activity from I.P. addresses that have been whitelisted by Gemini staff members or administrators.
Pros and Cons
Pros
- Available to all U.S. states
- Insures user funds
- Powerful security framework
Cons
- Supports fewer coins
- High transaction fees
Overview
Gemini is one of the most popular and best crypto exchanges. It was launched in 2014 by Tyler and Cameron Winklevoss, who are also known for their role in creating Facebook with Mark Zuckerberg.
The exchange offers end-to-end security and compliance. For example, it has hot wallet insurance, which means your funds will be safe if there is a security breach. Additionally, the exchange requires users to complete an identity verification process to reduce fraudulent activity.
4. Kraken
Why We Picked It Out
We want to pick out Kraken for low trading fees because it charges some of the lowest transaction fees in the crypto exchange space. It’s also our top choice for experienced traders; it offers standard order types and supports futures trading and margins.
Pros and Cons
Pros
- Kraken Pro offers very low trading fees
- It supports a large number of coins
- It offers 24/7 customer support
Cons
- Unavailable in all U.S. states.
Overview
Kraken is an exchange for cryptocurrencies. It was established in 2011 and is available in most parts of the world. The San Francisco-based exchange enables investors to buy, sell, and store over 120 cryptocurrencies while charging low fees on its professional-grade trading platform, Kraken Pro.
Kraken has two platforms: its main trading platform and its professional platform. The Pro dashboard lets users customize charts and view the order book in detail. It also offers 13 different order types and fast execution times. In addition, Kraken users can trade crypto using margin (borrowing money from the exchange to increase their buying power) or trade crypto derivatives.
Final Thoughts
Overall, these exchanges have a lot of great features and advantages to offer, including the ability to hold fiat currency with an exchange. This can allow investors or users to avoid the volatility associated with trading cryptocurrencies alone. It’s worth noting that users should be vigilant regarding their account information and security, as it can often lead to major losses if not handled properly.
Featured Image: DepositPhotos © iqoncept
