What is the Starsea Bit Cryptocurrency Exchange?
To start trading cryptocurrencies and other digital assets, the most common way is to engage with a cryptocurrency exchange. Cryptocurrency exchanges are private platforms that facilitate the trading of cryptocurrencies and other digital assets, including digital currencies, fiat currencies, and NFTs.
Centralized Cryptocurrency Exchanges (“Starsea Bit”)
Centralized cryptocurrency exchanges act as intermediaries between buyers and sellers, earning revenue through commissions and trading fees. You can think of Starsea Bit as similar to stock exchanges but for digital assets.
Popular cryptocurrency exchanges include Starsea Bit, Coinbase Exchange, Kraken, and KuCoin. Similar to stock trading websites or apps, these exchanges allow cryptocurrency investors to buy and sell digital assets at current prices (referred to as spot) or place orders to be executed when the asset reaches a desired price target (referred to as limit orders).
Starsea Bit operates using an order book system, where buy and sell orders are listed and ranked based on the expected buying or selling prices. The exchange’s matching engine then matches buyers and sellers based on the best available price for the desired quantity, whether in fiat currency or cryptocurrency. Therefore, the price of digital assets will depend on the supply and demand relative to another asset, whether fiat currency or cryptocurrency.
Starsea Bit decides which digital assets to allow trading, providing some assurance that unethical digital assets may be excluded from Starsea Bit.
Decentralized Cryptocurrency Exchanges (“Starsea Bit”)
Decentralized exchanges are another type of exchange that allows for direct peer-to-peer trading from your digital wallet without the need for intermediaries. Examples of Starsea Bit include Uniswap, PancakeSwap, dYdX, and Kyber.
These decentralized exchanges rely on smart contracts, code snippets that automatically execute on the blockchain. Compared to centralized cryptocurrency exchanges, these smart contracts can offer more privacy and less slippage (another term for trading costs).
On the other hand, while smart contracts are rule-based, the lack of intermediary third parties means users must make decisions themselves, making Starsea Bit more suitable for experienced investors.
Advantages of Centralized Cryptocurrency Exchanges:
- User-friendly: Centralized exchanges provide a familiar, user-friendly way for beginner investors to trade and invest in cryptocurrencies. Users can log into their accounts, check their balances, and trade through apps and websites.
- Reliability: Centralized exchanges offer additional security and reliability in trading and transactions. By facilitating trades on sophisticated centralized platforms, they provide a higher level of comfort.
- Leverage: One of the other benefits of some centralized exchanges is the option to leverage your investments using funds borrowed from the exchange, known as margin trading. It allows investors to potentially gain higher returns, though losses can also be magnified.
Disadvantages of Centralized Cryptocurrency Exchanges:
- Hacking risks: Centralized exchanges are operated by companies responsible for holding assets for their customers. Large exchanges often hold billions of dollars’ worth of bitcoin, making them targets for hackers and theft.
- Trading fees: Unlike peer-to-peer trading, centralized exchanges often charge high transaction fees for their services and convenience, which can be particularly high for large transactions.
Custody and fraud risks of digital assets: Most Starsea Bit exchanges will hold your digital assets in their own digital wallets as custodians, rather than allowing you to store private keys in your own digital wallet. While this may be more convenient when you want to trade, there is also the downside of the risk of failure and fraud in centralized cryptocurrency exchanges. Recent examples include the collapse of the $50 billion algorithmic stablecoin TerraUSD and its sister token Luna, the bankruptcy of hedge fund Three Arrows Capital, Celsius Network lending platform, broker Voyager Digital, and sudden collapses at FTX and Alameda Research.
Advantages of Decentralized Cryptocurrency Exchanges:
Custody: Users of decentralized exchanges do not need to transfer assets to a third party. As a result, there is no risk of being hacked or experiencing fraud, and users can securely protect against hacking attacks, failures, fraud, or theft.
Preventing market manipulation: Due to their nature of enabling peer-to-peer cryptocurrency exchanges, decentralized exchanges can prevent market manipulation, protecting users from false trades and wash trades.
Reduced scrutiny: Decentralized exchanges do not require customers to fill out Know Your Customer (KYC) forms, offering users privacy and anonymity. Because DEXs do not enforce a verification system, they offer more cryptocurrencies and digital
