Guide To Cryptocurrency Exchange
When Bitcoin was established in 2009, it also unintentionally created the need for a cryptocurrency exchange or digital currency exchange to come with it.
This exciting new prospect however can be complicated and proves why a cryptocurrency trading guide is an essential read for beginners who are looking to invest in digital currencies or ICO events.
Before we find out what a cryptocurrency exchange is, we must understand the individual words on a simple level
What is a cryptocurrency?
- Digital currency that uses cryptography (method of hiding information) to secure transactions.
What is an exchange?
- Marketplace where commodities of value are bought and sold by a buyer and seller
What Is a Cryptocurrency Exchange?
An online marketplace where you can buy or sell cryptocurrencies and exchange cryptocurrencies for traditional currencies a.k.a fiat money.
Cryptocurrency exchange is also known as the digital currency exchange
How do exchanges work?
Crypto exchange, how it works depends on the type of digital currency exchange platform.
Cryptocurrency exchange types
- Trading Platforms: Websites for buyers and sellers that charge a fee for each transaction
- Direct Trading: Person to person trading with the exchange rate set by the seller
- Brokers: Websites for buyers with the exchange rate selected by the broker
Different Cryptocurrency Exchanges
What is the difference between a centralised and decentralised cryptocurrency exchange?
One main difference is that:
- Centralised exchanges like Binance.com or Bittrex.com, will allow you to create an account you can directly send tokens to from your cryptocurrency wallet (like MetaMask)
- Decentralised exchanges like EtherDelta, will allow you to connect your cryptocurrency wallet (like MetaMask) directly to the exchange site.
Setting Up a Cryptocurrency Exchange Account
Setting up with a cryptocurrency exchange website is relatively straightforward, however, cryptocurrency exchange websites are currently (as of the 31st of January 2018) experiencing high demand to set up new accounts.
This means some are postponing or delaying the creation of new accounts. One potential reason behind this is because the exchanges are trying to strengthen their exchange infrastructure to avoid future security issues
How to Set Up a Cryptocurrency Exchange Account (Example Binance)
- How to register and deposit on Binance is straightforward. You are required to set up with email and password. Your account is then verified through email.
How to fund a Cryptocurrency Exchange Account (Example Binance)
- Once you have verified your account with Binance, you can deposit funds immediately from your chosen cryptocurrency wallet.
- There is a person verification process within cryptocurrency wallets and this should be completed prior to attempting to fund a cryptocurrency exchange account.
How to Exchange Cryptocurrency for Cash
To sell your cryptocurrency for cash or fiat currency as it’s known, you need to send your cryptocurrency to your registered wallet that allows fiat transactions.
You can choose to send your cryptocurrency to an exchange you are registered on that supports crypto to fiat exchanges like CoinBase.
A guide to investing in an ICO using Ethereum is a perfect example to understand this process in more detail.
Safe Cryptocurrency Exchange Sites
Cryptocurrency in general is highly unpredictable, however taking caution every step of the way through proper research will stand you in good stead.
Regarding the most reliable cryptocurrency exchange, there are a few popular ones people use due to their safety. Examples of these trusted cryptocurrency exchange sites are Coinbase, GDAX and Bitfinex. To prove its popularity, Coinbase hit top spot on Apple’s US App Store in December 2017.
Best Cryptocurrency Exchanges – Best Digital Currency Exchange
What cryptocurrency exchange is the best?
What cryptocurrency exchange has the most coins?
Coinbase may be a popular cryptocurrency exchange, but it does not have the most coins.
Some of the larger exchanges like Binance, Kucoin, Bittrex and GDAX hold more coins. This is why it is said to be a good idea to set up a few cryptocurrency exchange accounts when trading.
What cryptocurrency exchange should i use?
When choosing the best cryptocurrency exchange for you, there is a few things that you must consider, for example:
- Accessibility in your country
- Its overall security and previous record
- What currencies it currently hosts
- How easy it is to use
What cryptocurrency exchange uses PayPal?
There are a few exchanges that accept PayPal, however Coinbase is one of the most popular. Coinbase added support for PayPal and credit cards in 2016 as they looked to “add as many funding mechanisms as possible to make exchanging digital currency easy”.
Cryptocurrency Exchange Fees
There is no such thing as a completely free cryptocurrency exchange. The cryptocurrency exchange is usually free to sign up to however there are cryptocurrency exchange fees that come with using the platform.
What cryptocurrency exchange has the lowest fees?
A few exchanges with low fees are GDAX, Binance, HITBTC and Bitfinex
Types of cryptocurrency exchange fees
- Exchange Fees: Set by the exchange to generate a source of income
- Transaction Fees: Each exchange sets its own fee per transaction e.g 0.1% or 0.25% of each trade
- Maker-Taker Fee: A maker is someone selling a cryptocurrency and a taker is someone buying. The maker usually takes a higher fee as they are providing liquidity to the market.
- Withdrawal Fees: Deposits and withdrawals are usually free but generally depend on the exchange. In some cases there is a withdrawal fee which depends on the cryptocurrency you are trying to withdraw.
- Network Fees: This fee is for the miner that verifies a transaction and is usually set by the miner. In some cases a wallet will allow the sending party to set a transaction fee they are willing to pay
- Wallet Fees: This is a minor fee and goes towards the wallets software updates and the general storing of your crypto funds
If investing in cryptocurrencies interests you, then you will thoroughly enjoy the guide to investing in an ICO
This 6 stage guide provides answers to questions about how to invest in an ICO, using the Ethereum wallet, buying Ethereum, transferring Ethereum, viewing tokens…