Cryptocurrency exchange is a digital marketplace where you can exchange one cryptocurrency for another cryptocurrency or for fiat currency. A currency exchange is an online platform that acts as an intermediary between buyers and sellers of the cryptocurrency. They can be market makers that typically take the bid/ask spreads as transaction commissions for their services or simply charge fees as a matching platform.
Here is the list of the Top 10 Cryptocurrency Exchanges based on daily trading volumes:
In general there are a few types of cryptocurrency exchanges:
- Centralized “Traditional” Exchanges: This exchange is like the traditional stock exchanges where buyers and sellers trade based on the current market price of cryptocurrencies (with the exchange playing the middle-man). These type of trading platforms generally take a fee from each transaction. Example: Kraken, Poloniex, etc.
- Decentralized Exchange: A platform that offers direct peer-to-peer trading between buyers and sellers. Direct trading exchanges don’t use a fixed market price. Sellers set their own exchange rate. The hosting of decentralized exchanges is distributed through nodes meaning that there is no risk of server downtime. Example: Etherdelta, 0x.
- Cryptocurrency Brokers: These are website-based exchanges that are like the currency exchange at an airport. They allow customers to buy and sell cryptocurrencies at a price set by the broker (generally at the market price plus a small premium). Example: Coinbase.
- Cryptocurrency Funds: Funds are pools of professionally managed cryptocurrency assets which allows public buy and hold cryptocurrency via the fund. Example: GBTC.
Bancor is not an exchange. It is a protocol which allows for asynchronous price discovery and continuous liquidity. This means that converting a cryptocurrency does not require matching two parties in real time with opposite wants, rather, it can be completed by a single party directly through the token’s smart contract.
As the first of its kind, Bancor providing a simple solution for exchanging cryptocurrencies, where the user sends cryptocurrencies or tokens to an address, and receives a different currency in return using the reserve mechanism for algorithmic pricing.
So, unlike exchanges where you have to find someone who actively wants to buy what you’re selling, Smart Tokens™ are always completely and immediately liquid regardless of trade volume. Smart Tokens™ built using the Bancor protocol form an interconnected monetary network that instantly facilitates any request to convert between tokens in the network.
The Bancor protocol does not require matching two parties in order to facilitate an asset conversion transaction, thus enabling continuous liquidity for assets at any time and scale. It also aims to solve some of the scalability and cost challenges of current decentralized exchange solutions.