You can come across countless dedicated online platforms where Internet users can trade bitcoin (BTC). Cryptocurrency exchanges – as they are referred to – differ from a traditional stock exchange in several ways. Some platforms deserve more attention than others – not just because they are more popular, but also because they offer better security measures, a greater range of services and a larger capital. Below, we will describe the most well-known exchanges, as well as explain how a bitcoin exchange works.
Buy and sell bitcoins through an exchange
A bitcoin exchange is a place where you can buy and sell bitcoins (BTC), as well as other cryptocurrencies such as Ethereum, IOTA, Stellar or NEO. Cryptocurrency exchanges are part of an alternative money system based on trading virtual money. Unlike exchange offices, which can be used by both beginners and experienced cryptocurrency users, bitcoin exchanges are designed for people who already have some understanding of virtual money. Without elementary knowledge of the rules governing this market you have no chance of getting spectacularly rich – unless you are extremely lucky.
Therefore, if you are seriously interested in investing in cryptocurrencies, it is essential to read all the necessary resources that will prepare you for this. All kinds of articles, books, and videos are available to help all those who still know little about the world of cryptocurrencies. We also recommend our website – you will find all the necessary information here.
What is a bitcoin exchange?
A bitcoin exchange is not only a platform for exchanging cryptocurrencies, but also a valuable source of information on current market trends around the world. On websites such as Binance.com you can easily check the current rate of bitcoin and other cryptocurrencies (this can change in A matter of minutes). In addition, you will have access to charts that accurately inform you about the prevailing market trends and allow you to predict the Increases and drops in prices. Reading charts is not difficult – we have already mentioned this in a previous article. It is worth learning this skill, as it is essential for any investor.
A bitcoin exchange is an interface of sorts – a place where you can easily, quickly, and safely buy and sell BTC and other cryptocurrencies. All the transactions you perform will be recorded in a special register, technically called a blockchain, which collects all the relevant data about the transactions performed by users on the system. Deposits and withdrawals are recorded instantly. You do not have to view this register, although you can do so at any time – just like any other Internet user using the currency.
The largest platforms in the world are there to help customers in case of any technical problems or failures, as well as in case of difficulties caused by the lack of experience.
How does a bitcoin exchange work and what does it offer?
Cryptocurrency exchanges are platforms that allow you to buy and sell cryptocurrencies in just A matter of minutes. Depending on the specific exchange, transactions can be made using digital currencies (cryptocurrency exchange) or traditional currencies. On exchanges such as Binance you can easily buy bitcoins using USD or any other traditional currency. You can also easily check the current bitcoin exchange rate. You are trading with other users like yourself.
Exchanges act as an intermediary through which Internet users who own bitcoins or other cryptocurrencies can exchange money with each other. According to research, such services can become a Profitable source of income for skillful investors. A large number of bitcoin users are investors who do not treat cryptocurrencies as a means of payment, but as a profitable investment.
A bitcoin exchange offers a chance to make easy money and it has been eagerly used by enterprising Internet users. You too can generate money using bitcoin. However, keep in mind that BTC and other cryptocurrencies have no physical form – they are virtual money which you cannot withdraw from an ATM. You can, of course, convert them to one of the traditional currencies at any time, but bitcoins themselves, strictly speaking, are data in a vast p2p system.
The bitcoin exchange: a place for investors
Exchanges are actually essential for investors. How else could they connect with people who would be interested in buying cryptocurrencies? Ad websites don’t offer the same opportunities as an exchange. Platforms such as Binance display current rates in real time and contain various features that make it easier to conduct transactions – and for that reason alone, it is worth having an account there. For example, The preview option allows you to check how many bids have been placed so far for a given seller and how much money other Internet users have offered. If someone cares about time, they can outbid all other bids, paying more than other users or by selling cheaper.
Cryptocurrency exchanges greatly speed up the process of buying and selling bitcoin, but their role is not limited to just mediating in trade. High competition in the market forces each such platform to maximize the services it offers, making modern cryptocurrency exchanges a multidimensional investment tool. The competition between services favours the popularization of lesser-known digital currencies, which would have no chance to exist on the market without exchanges. Some exchanges also have an educational section, offering their users access to informative materials about cryptocurrencies and investing on the exchange. The ability to conclude CFDs is also an advantage.
To sum it up: modern cryptocurrency exchanges are complex services with a wide scope of services, resembling social networking sites to some extent. They are not just a platform for exchanging currency, but also a rich source of information. Besides, the number of exchanges that issue cryptocurrencies with a fixed rate, so-called stablecoins, continues to grow around the world – stablecoin rates depend on the value of the specific traditional currency they are linked to, and nothing else. Cryptocurrency exchanges also release their own tokens that allow investors to minimize commissions for executing buy/sell transactions, which is also a significant convenience.
Centralized and decentralized exchanges
Although cryptocurrencies and blockchain technology as a whole are based on decentralized systems, cryptocurrency exchanges are strictly centralized entities, as are most such platforms existing on the market today. Only a small number of exchanges are decentralized, although a growing number of websites of this kind continue to emerge. So far, however, centralized exchanges are the norm. Some of them, in response to market needs, are setting up their decentralized counterparts, the so-called DEXs (decentralized exchanges). These are experimental and do not set any standard in the cryptocurrency world. Deposits and withdrawals work a little differently in this case.
What is the difference between a centralized and decentralized exchange?
The latter relies on the theoretical exclusion of a third party from the buying and selling process. As we know, transactions take place due to the pairing of corresponding orders in the blockchain. The funds that we wish to transfer to someone else are constantly stored in an electronic bitcoin wallet. A centralized bitcoin exchange collects the data of its users and stores it on a Central server. Users can access their funds via email, after entering a password that appears alongside many others in the databases. Therefore, centralized cryptocurrency exchanges are more vulnerable to cyber-attacks. Over the past decade, several such exchanges have already fallen victim to hackers, resulting in investors losing millions of dollars (in bitcoin) overnight. Therefore, if you wish to buy something, deposit money and buy it right away and then move the money to a wallet (preferably a hardware wallet).
Centralized exchanges are also subject to censorship. The idea behind the creation of Bitcoin and other cryptocurrencies was to make the new means of payment completely independent of government institutions. Meanwhile, on a centralized exchange, government authorities have the right to “freeze” or confiscate your money if they reasonably suspect how you came to be in possession of it.
Decentralized platforms are devoid of these drawbacks. They rely on p2p networks, much like tokens, and use automated algorithms to verify transactions. However, they are a relatively new technological solution that has not yet been fully tested. Therefore, very few investors are using them.
A decentralized bitcoin exchange does not collect data on a Central server, nor does it store funds. Transactions are carried out directly with the so-called peers, and the funds that are used to perform them remain under the Complete control of Internet users. There is no need to connect to a Central server to finalize a transaction or to make a withdrawal.
Additionally, decentralized services allow their users to maintain complete anonymity, which is increasingly difficult to achieve on centralized exchanges that are subject to pressure from government regulators. Every transaction on a DEX is anonymous and encrypted, which provides Greater privacy and protects against government interference.
Overall, DEXs appear to be a more favourable option as users pay less commission by eliminating the intermediary party in the transaction. Moreover, the direct movement of funds between peers results in a faster transfer. DEXs provide a higher level of security because they do not collect their users’ data, which could be stolen by hackers. The possibility of a decentralized exchange being hacked is unlikely. In any case, it is much easier for cybercriminals to hack a Central server.
It is worth highlighting the DEXs ability to integrate directly with hardware wallets. On a centralized exchange, users must enter private keys to transfer tokens from a wallet to an exchange account. This carries the risk of password theft, as all it takes is the installation of a keylogger on the victim’s computer to discover their private keys. When using a DEX, keys can be transferred directly from the hardware wallet to the exchange.
Thus, users have Complete control over their cash. They are not dependent on a central authority as is the case in a centralized exchange. Even when making transactions, they do not need anyone’s intermediary because DEX uses the p2p network architecture and blockchain technology. They also do not need to share private keys with the exchange operator. This significantly increases the level of security.
The security of your funds: an exchange is not a wallet!
Each investor should adhere to the rule of keeping funds on the exchange platform only when it is necessary. An exchange account is not suitable as a cryptocurrency wallet, although many internet users treat it as such. As we have already mentioned, most cryptocurrency exchanges are centralized, which means that it would only take one hack to gain access to all of the users’ accounts. Of course, exchanges have numerous security measures in place to protect against such an occurrence, but it’s important to keep your wits about you, because even the biggest players on the market Fall victim to cyber-attacks. Investors with large amounts of bitcoin should be especially careful.
Digital wallets (“hot” or “cold” wallets) are used for storing digital money, and not exchange accounts. If you value security more than convenience, we advise you to use a high-tech hardware wallet such as Trezor or Ledger. Once you have deposited funds into your exchange account, buy the currency you need and preferably transfer it to your wallet right away.
Which bitcoin exchange is the best?
Before deciding to use the services of a particular platform, it is worth taking several factors into account.
ach exchange has Its own pricing and determines the amount of commission for conducted transactions. Before you register an account on any site, check how much the competition charges.
It is also worth checking the volume of transactions. The higher the value, the easier it is to trade cryptocurrencies.
Pay attention to the security of the service. Make sure that it provides users with a Standard level of protection. You can find information about this either on the homepage or in the relevant section of the website. One of the best security features is multi-factor authentication (2FA) – if an exchange has this in place, it means they are investing in the security of their customers.
Since cryptocurrency exchanges are prone to hacking, it is a good idea to check who is in charge of running the website. If it is a company, it’s good to learn where it’s registered. It would not be out of the question to find out if the operators of the exchange are public figures or if they have social media accounts, such as LinkedIn profiles.
Make sure to find out whether CFDs can be traded on the given exchange.
Investing in the stock market is a big risk, but also a big opportunity to get rich quick. All you need to do is take a few minutes to create an account with a service that allows you to trade cryptocurrencies. After entering your personal details, you gain access to many different features all in one place. Apart from exchanging cryptocurrencies, a bitcoin exchange also allows you to check current rates, predict the value of bitcoin in the future (at least the nearest one), and learn many interesting things about digital money. You will find not only the latest news from the industry on such platforms, but also educational content for investors. In addition to BTC, you can also buy other currencies, using funds previously transferred to your account. Reminder: these can be traditional currencies, such as USD, as well as digital ones. A growing number of services offer the possibility to trade CFDs. Among the many different platforms, it is best to choose one that has a good reputation and, on the other hand, has something to offer that is not available on other exchanges.
Trading cryptocurrencies can be a lucrative activity, so it is a good idea to set up accounts on several platforms. If you fail on one you can always bail out with successes on another. If you are just starting your adventure with investing, buy a smaller amount of bitcoin first. Larger investments carry a high risk. Dumping all your money into inherently unreliable projects is certainly not wise, and trading cryptocurrencies often requires you to keep a calm and focused approach.