Know about Crypto Exchanges & How Does It Work?

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Unocoin Simplifying Your Cryptocurrency Trading and Investments.png
Unocoin Simplifying Your Cryptocurrency Trading and Investments.png

The cryptocurrency industry has witnessed explosive growth over the last few years, leading to widespread adoption and a surge in the number of crypto exchanges. As new tokens and projects continue to emerge daily, the growing interest in cryptocurrencies has prompted many investors to explore how to start investing in crypto assets for potential passive income and how to securely store their digital assets.

To help navigate the basics of entering the crypto market, let’s explore what crypto exchanges are, the different types available, and how to choose the right one to start investing in crypto tokens.

What Is a Crypto Exchange? How Does It Work?

A crypto exchange is a platform that facilitates the buying and selling of cryptocurrency assets. Interested parties can use these exchanges to trade one cryptocurrency for another or purchase crypto tokens using fiat currency, such as INR or USD. These exchanges provide a marketplace for crypto tokens, similar to how e-commerce platforms like Amazon or Walmart offer products for consumers. Users can deposit money via methods such as direct bank transfer, net banking, or P2P, with a small fee charged for each transaction, depending on the exchange.

Crypto exchanges display the current market prices of the crypto tokens they offer. Users can transfer fiat currency to their exchange wallets and invest in the token of their choice. They can also convert those cryptos back into INR or another currency or use the tokens in their wallet to exchange for another cryptocurrency.

What Are the Different Types of Crypto Exchanges?

The rise in crypto exchanges has created various types of platforms to cater to the massive demand from the crypto community. These exchanges differ based on the services they offer to meet the specific needs of their customer base.

1. Centralized Exchanges (CEX)

Centralized exchanges are the most common type of crypto exchange platform. They offer top-notch security, user-friendly interfaces, and simple processes, making them ideal for quick and seamless crypto trading. As the name suggests, these exchanges are governed and regulated by a central entity.

Unocoin Exchange for crypto trading in India.

All transactions on a centralized exchange are recorded and validated by the company to maintain a thorough database and avoid discrepancies. User funds deposited in these wallets are managed by the CEX. To open an account, users must fulfil KYC requirements, and provide personal information. This step ensures compliance with regulations and enhances security.

2. Decentralized Exchanges (DEX)

Decentralized exchanges (DEXs) operate without any central authority. Trades on a DEX are fully automated and executed through smart contracts and decentralized applications. Since these exchanges are not monitored, there is no need for KYC, and users are not required to provide personal information. Some crypto enthusiasts consider DEXs more secure due to the automated nature of smart contracts designed with security checks.

However, the interface of DEXs is not as user-friendly as that of CEXs, resulting in slower transaction speeds and lower volume. While CEXs might be more suitable for beginners, experienced traders may find DEXs beneficial for their investments.

3. Hybrid Exchanges (HEX)

Hybrid exchanges combine the best features of both decentralized and centralized exchanges. Although still in the developmental phase, hybrid crypto exchanges offer the liquidity of centralized platforms while maintaining the anonymity and security of decentralized exchanges. A key feature of HEX trading is the absence of taker fees and gas fees.

Steps to Choose a Crypto Exchange – Comparing Crypto Exchange Platforms

Crypto exchanges function similarly to brokers, providing traders with all the tools needed to execute trades, such as buying Bitcoin, Ethereum, or other altcoins. However, there are specific criteria to consider before choosing a crypto exchange:

Step 1: Conduct Thorough Research

Just as selecting a crypto token for investment requires thorough research, choosing a crypto exchange also demands careful consideration. Ensure that the exchange meets all your requirements and is easy to navigate.

During your research, examine market sentiment regarding the exchange and how the company presents itself. Investigate any security issues or hurdles the exchange has faced and how these were addressed.

Step 2: Prioritize Security

Security is paramount when choosing a crypto exchange. Check the security measures in place, often detailed in the exchange’s product feature blogs. To enhance safety, consider keeping some of your assets in a cold wallet while storing the rest in a hard wallet.

Step 3: Evaluate Exchange Transparency

Trust and transparency are crucial, especially since many countries lack clear crypto regulations. To identify a reliable exchange, review its audit information, which provides insights into the company’s financial health.

Step 4: Assess Coin and Token Offerings

It’s important to review the exchange’s history of listing and delisting coins. Reliable exchanges conduct rigorous checks on any new token before listing it on their platform.

Step 5: Consider Order Book Volume

The order book, which consolidates purchase and sale orders on the exchange, is a key indicator of activity. A higher-order book volume suggests more traders and investors are using the exchange, leading to greater liquidity for exiting any cryptocurrency.

Step 6: Verify Exchange Location

The location of the exchange’s headquarters is significant, as it determines the rules and regulations applicable to the platform. Investors should be aware of the exchange’s registered office and its adherence to relevant laws and regulations.

Criteria for Choosing Crypto Exchanges – What to Look for When Choosing a Crypto Exchange

Exchange Fees
Fees vary from one exchange to another. Some charge a flat fee, while others impose additional transaction charges. It’s important to understand the fee structure before choosing an exchange.

Payment Methods
The variety of payment gateways an exchange offers reflects its commitment to users. Ensure the exchange provides multiple payment options for convenience like Instant Bank transfers, NEFT, and RTGS depending on the regulations of the Country.

KYC Compliance
Many crypto exchanges in India require KYC compliance to redeem profits. Though the process is not lengthy, it helps protect investors from financial crimes.

User Interface
A user-friendly interface is essential for a positive trading experience. The exchange’s mobile and web applications should be secure and easy to navigate, as digital tokens are susceptible to theft and hacking.

Customer Service
Efficient customer service is crucial for resolving issues promptly. The faster the support, the more satisfied investors will be with the exchange.

Types of Crypto Exchange Charges in India

There are different types of fees associated with various crypto exchanges. Here’s a look at the common charges:

Joining Fee
Most crypto exchanges in India, including Unocoin, have waived joining fees. However, some exchanges may still impose a small membership fee for inactive accounts.

Deposit Fee
This fee is charged when users deposit money or coins to the crypto exchange to initiate buying or selling. The amount depends on the method used for transferring funds, such as payment service providers, crypto wallets, UPI, net banking, or bank transfers. In unocoin Exchange, there is no INR deposit fee for the users.

Also read Why choose Unocoin Exchange

Trading Charges
Trading charges are a crucial part of the fee structure on a crypto exchange. They may be levied as a flat percentage of the transaction amount or based on the type of orders placed, such as maker and taker orders. Some exchanges may claim zero fees, but users should be cautious, as they might charge through the spread—the difference between buying and selling rates.

Withdrawal Fee
A withdrawal fee may apply when users convert their cryptocurrency into fiat currency. Whether withdrawing money fully or partially into a registered bank account or withdrawing coins, there may be associated costs.

How to Open a Crypto Exchange Account Example: Unocoin

Opening an account with a crypto exchange is straightforward. Follow these steps once you’ve selected an appropriate exchange:

  1. Download the Unocoin app from secure sources like an App Store or Play Store and create an account.
  2. Provide the necessary information, such as your email ID, name, and contact details.
  3. Verify your email, after which you’ll receive instructions to complete the KYC process.
  4. Verify your address via email.
  5. Complete the KYC process.
  6. Set a strong password.

Note: Never share your app, wallet, or exchange passwords, as they are difficult to recover if lost.

How to Buy Crypto Tokens?

Once your account is set up, buying crypto tokens is simple:

  1. Sign in to the app.
  2. Transfer INR funds to your wallet. 
  3. Choose the token you wish to invest in.
  4. Select the amount you want to invest.
  5. Place your order.

Conclusion

As with any investment, thorough research is essential before investing in cryptocurrencies. Consider your investment goals and financial situation before diving into the crypto market, which is known for its volatility. Only invest what you are comfortable with.

Investing in your favorite cryptocurrency is safe and straightforward on Unocoin. Simply download the Unocoin app, complete the verification process, fund your wallet, and start investing in your desired crypto assets.

Please find the list of authentic Unocoin accounts for all your queries below:

Disclaimer: Crypto products are unregulated as of this date in India. They could be highly volatile. At Unocoin, we understand that there is a need to protect consumer interests as this form of trading and investment has risks that consumers may not be aware of. To ensure that consumers who deal in crypto products are not misled, they are advised to DYOR (Do Your Own Research).

 

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