Helpful articles

Can You Trust A Cryptocurrency Exchange Service?



Updated: Feb 22, 2023, 15:51 PM

To put it in a few words, you can trust some cryptocurrency exchange services. However, you can not trust any old crypto exchange you run into.

You should follow some rules of thumb when signing up for or using a crypto exchange. We will go into what you should look for in an exchange below. But first, let’s clarify why you can trust some cryptocurrency exchange services.

Why Can I Trust a  Cryptocurrency Exchange Service?

Crypto exchanges are not that novel anymore. Trading platforms like Binance, CoinBase, Kraken, Gemini, etc., have been around for a while. They drive trillions of dollars worth of transactions every day. If any significant platform like this steps out of line, everyone will know about it. The authorities would have a field day with them, considering how worried they already are about crypto.

So, you can generally trust any significant cryptocurrency exchange based on a good track record. With the rise of DEXs or Decentralized Crypto Exchanges, online transactions’ safety has improved.

Don’t get us wrong. There are still plenty of scammers out there waiting for you to slip up. But as long as you stay vigilant and do not do anything too risky, you should be safe.

However, if you are ever in doubt, you can check out an exchange on CoinRanking. We would recommend choosing an exchange with the ‘Recommended’ check.

Photo Credit: Coin Ranking

Besides lists like these, you will become familiar with the big names in the market with time. For the average Joe, these exchanges offer more than enough with a squeaky-clean history regarding asset security.

What Is a Crypto Exchange?

The last couple of years has brought a lot of new terms and concepts for us to wrap our heads around. So bear with us because we’re about to talk about one more.

Cryptocurrency exchanges are like the stock market but for cryptocurrencies. There are two main types of exchanges based on the governance model they follow:

●     Centralized Exchanges

These exchanges are closest to the traditional model of trading stock options. They are the third party for you when you buy or sell cryptocurrencies. That is why some of them are also called custodial ‘custodial’ exchanges, something we will discuss briefly.

You can try many popular centralized exchanges like Binance, Coinbase, Kraken, Gemini, CEX.io, etc.

These exchanges currently occupy the top spots in the industry. This may be because of their enhanced convenience and customer support compared to DEXs.

●     DEX or Decentralized exchanges

In contrast to centralized exchanges, decentralized exchanges do not act as the ‘middle-man’ in your exchange. There is no man or institution behind these exchanges at all. They run on smart contracts and liquidity protocols.

Some of the most famous examples of DEXs include PancakeSwap, UniSwap, and SushiSwap.

Since these exchanges are not institutionalized, they can sometimes slip through regulations. They also take out the counterparty risk you experience with centralized exchanges. However, they can be hard to navigate and may not be as beginner-friendly as CEXs.

Things to Look for in A Crypto Exchange

Cryptocurrencies are not as well regulated as the traditional financial system. The framework of existing laws may not apply to these novel assets. So you should tread lightly until the system somehow makes itself as stable and well-regulated as the traditional finance world.

Finding the proper exchange involves considering a bunch of things. We are going to look into the key ones here.

1.   History and Reputation

Photo Credit: Elmhurst University

Staying secure on the internet is paramount. With cryptocurrency, the danger and the potential risk are on another level. So when choosing a crypto exchange, make sure they do not have a history of security breaches.

Most popular cryptocurrency exchanges have a clean enough record for you to trade without concern.

Generally speaking, DEXs are more secure than CEXs. This is because there is no central entity hackers can manipulate or exploit. But still, there have been some cases of even DEXs being compromised. We recommend always using a well-established exchange to stay on the safe side.

If you are using a relatively new exchange, make sure they are legit. You should not interact with any exchange that does not have a secured connection. A padlock or ‘secure’ in the address bar shows your connection is encrypted, and no third party can swoop up your confidential information.

2.    Counterparty Risk

Photo Credit: Analyst Prep

Another aspect of an exchange’s security is whether or not it is custodial. This relates to the counterparty risk in a crypto transaction, i.e., the risk that the exchange will not fulfill its part of the transaction.

A custodial exchange takes your coins via an on-blockchain transaction. This transaction is registered and secure.

After it receives the coins, the exchange performs transactions and records them in its database (not the blockchain). So when you transfer your funds to them, they have your coins in their ‘custody,’ thus the name ‘custodial’ exchanges.’ Again, some of the biggest exchanges are custodial, such as Binance.

The general assumption is that custodial exchanges are less safe. But, this can be an oversimplification. Although these exchanges indeed introduce some risk, it is also true that they would not have as big as they have if they were not secure.

So if you are looking for the most secure crypto exchanges, do not rule out custodial exchanges. But if you want to be sure and do choose to go with a non-custodial DEX, Shapeshift, 1inch, PancakeSwap, and UniSwap are some of your best choices.

On the same note, some exchanges only offer users custodial wallets. This means the user cannot access their funds’ private keys. We would generally advise you to stay away from these exchanges. Go with exchanges that let you withdraw your funds anywhere, anytime.

3.  List of Services

Photo Credit: CRM

Different exchanges can offer different services. For example, CoinMama does not provide you crypto-crypto transactions. You can only purchase crypto using fiat currency like USD. Although they call themselves an exchange platform, this takes away a lot of trading flexibility from the user.

On the other hand, exchanges like Kraken offer you fiat-crypto and crypto-crypto transactions.

Besides transactions, you should also judge exchanges based on the other services they offer. For example, some exchanges allow you to stake your assets while others do not. Similarly, some exchanges are beginner-friendly and do not throw graphs at you, while others do.

Services like these are not always necessary, but the more flexibility you have with your exchange, the better.

There are so many verified and established exchanges these days that security is no longer a concern for knowledgeable customers. Instead, you may better choose one based on the additional services an exchange offers.

When looking for an exchange, jot down the detailed list of services you require. This could be trading specific coins, staking, etc.  Once you have those down, look at the complete list of services every potential exchange offers. Similarly, please take a look at their competitors so you know who offers you the best deal for the same service.

4.   Fees

Photo Credit: Louis Martin – Medium

You can also compare exchanges based on the fees they charge. The fee structure can vary greatly depending on whether you use a credit card or a debit card. Just so you know, credit cards are generally more expensive to use on exchange platforms.

You want to go with the platform that offers you the most competitive fees. Binance, for example, has relatively low fees and has a high trading volume.

By the way, if you are new to crypto exchanges, the general fees you see for exchanges are not the whole of the transaction fee. Each blockchain has its own transaction fee you pay every time you run a transaction on it. So the actual transaction fee would include both the exchange’s fee and the blockchain’s own fee.

5.   Accessibility

Photo Credit: Oyetoke Tobi Emmanuel – Medium

An easy and understandable UI can make a ton of difference for beginners. The more convenient it is to use, the more encouraging it is for you. So if you are not familiar with crypto trading, we would recommend going with a relatively simple exchange. Generally speaking, broker platforms like CoinMama are the best places to get started.

But as you learn and move towards being an intermediate crypto trader, you might want to choose an exchange with more functionality. You would want those candlestick graphs and limit or stop orders at this stage.

Platforms like Coinbase and Kraken offer you services for both levels of detail. Where beginners would go with the standard Coinbase and Kraken platforms, they can progress to Coinbase Pro and Kraken Pro once they are ready to move on.

We would recommend going with an exchange that matches your level of experience in the crypto sphere. If you are looking for day-trading, you would also want an exchange that has a mobile app—for example, Robinhood, Kraken, and KuCoin.

6.   KYC Policies

Photo Credit: Vecteezy

Another aspect of accessibility is KYC policies. Some exchanges can be strict about who they let on to their platform. Although this is prudent and probably a good move on the exchange’s part, it can also be annoying for you.

So if you are uncomfortable with spending some time sending your private information to an exchange, you can opt for exchanges with less stringent policies. For example, KuCoin has convenient policies regarding user information for its lowest level KYC verification. However, the story of details you have to share goes up if you want additional features and lesser limits on withdrawals. The same goes for other centralized exchanges like Kraken.

However, DEXs like Shapeshift can offer completely KYC-free services. This is because these platforms do not come under the KYC regulations to which a traditional CEX may be subject. So if you want complete exemption from giving up your details, a DEX is the way to go. Note that this might not be as easy to navigate and use.

What About Coincharger? Can You Trust It?

Coin changer is a new cryptocurrency exchange platform. Although it is a young exchange, it can gradually become established.

Twitter

It currently offers exchange services for some rare coins like FLOKI, KISHU, and BabyDoge, etc. If you are interested in any of these up-and-coming coins, you should get yourself familiar with the exchange.

In Summary

Cryptocurrency exchanges are not always bulletproof, and many scammers are out there. You must protect yourself against bad actors and choose the best exchange. We would advise sticking to the big names in the industry. Be wary of anything that sounds too good to be true.

There are always some up-and-coming projects in the crypto world. One of these is CoinChanger, a relatively new crypto exchange. You can trade some unique coins here, so keep an eye on them if you are into that.

We also hope the listed things help you make the right choice. Good luck on your crypto journey.