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Centralized exchanges are platforms where many of the world’s most popular cryptocurrencies can be purchased with fiat currency, traded and even staked for rewards.
Each platform has different fees that it charges its customers to trade, with many exchanges moving towards zero fees as competition in the space heats up.
These service providers are governed by a centralized authority — as opposed to a decentralized exchange — and require submitting personal information to set up accounts to transact and use certain functionalities.
This is necessary to prevent fraudulent activities like money laundering and theft to take place and helps to promote security on the exchanges themselves.
Whilst cryptocurrency and the use thereof advocates for complete decentralization, centralized exchanges are a necessary “evil” that creators and collectors can benefit from by being able to:
- Buy cryptocurrency with fiat currency to fund your Cardano wallet and mint/purchase NFTs with ADA
- Withdraw trading profits to centralized banking platforms to use “irl” (in real life)
- High-interest staking to make cryptocurrency like ADA work hard for you as opposed to simply “hodling” it long-term in your wallet (holding on for dear life)
Want to learn more about centralized exchanges? Check out our review here.