What is Crypto Exchanges? -Your Ultimate Guide to Trading Platform

10/02/2022By: C, Fiona

Cryptocurrency may now be everywhere, but it remains a mystery to many potential investors. Just how do they function, exactly? What are the various exchanges, and how do they differ from cryptocurrency wallets? Learn all about the ins and outs of bitcoin trading with our handy guide.

Crypto Exchange, Explained

Users of crypto exchanges can buy and sell Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) for other cryptocurrencies and fiat currencies such as the US dollar and the Euro.

Due to the fact that most conventional financial businesses do not include cryptocurrencies in their offerings, exchanges have become an integral aspect of the cryptocurrency ecosystem. Without an exchange, you’d have to locate a willing crypto trading partner and negotiate a price with them directly. The next step is the complicated transfer of coins to each other’s cryptocurrency wallets.

Crypto Exchanges vs Crypto Wallet

The two most important tools for managing cryptocurrency are crypto wallets and exchanges. Wallets are digital storage locations for cryptocurrency, whereas exchanges are marketplaces where users may buy and sell cryptocurrencies at market prices.

Crypto exchanges Crypto wallets
Facilitate trading between users Hold the private keys that are necessary to access cryptocurrency on the blockchain
Convert fiat currencies into digital currencies Are offered by exchanges and independent developers.
Are available 24/7, unlike traditional investment firms Can be an online-only platform, a physical storage device, or incorporate both aspects.

 

Many cryptocurrency exchanges run their own wallet services, allowing customers to start trading digital currencies as soon as they register an account with the exchange. Known as web-hosted wallets, the security protocols for these are the responsibility of the exchange that hosts them.

If you’re a serious trader, you should have a separate cryptocurrency wallet where you store your coins while you’re not using them. For the simple reason that if the exchange gets hacked, you could lose everything you’ve ever traded.

Independent digital wallets offer a considerably safer choice for keeping the majority of your crypto, albeit you will be responsible for securing, backing up, and managing your own cash.

 

How do crypto exchanges work?

The sort of platform used determines how cryptocurrency exchanges operate. The majority of cryptocurrency trading platforms are classified as centralized exchanges that serve as brokers, standing between buyers and sellers.

Users can deposit funds into exchanges to purchase cryptocurrencies or deposit their own digital assets to engage in spot trading of one cryptocurrency for another, or vice versa. As with exchanging normal currencies at a bank, traders can anticipate paying a fee when converting one cryptocurrency to another (for example, converting USD to EUR).

A wide range of payments, including credit card payments, direct bank transfers, credit or debit cards, money orders, and even gift cards, may be accepted by exchanges in return for digital currencies.

You can withdraw your cryptocurrency funds and transfer them to any other wallet of your choice using specialized crypto and bitcoin exchanges. Others, particularly those that concentrate on other assets like stocks and exchange-traded funds (ETFs), such as Robinhood and eToro, only allow you to buy the cryptocurrency; you cannot transfer it outside of their web wallets.

Types of cryptocurrency exchanges

There are three types of cryptocurrency exchanges: centralized, decentralized, and hybrid.

 

Centralized exchanges (CEX)

The most typical and established type of cryptocurrency exchange are centralized exchanges. These provide investors with a platform to trade cryptocurrencies and are owned by private corporations. This kind of exchange typically has more trading pairs, higher trade volumes, and more liquidity.

Because of their better user interface and onboarding, availability of customer assistance, and insurance should the platform’s systems fail, centralized exchanges are frequently regarded as a viable choice for beginner cryptocurrency traders.

Users of this sort of trade are fundamentally more susceptible to hacker assaults, which is the main problem. Additionally, some customers find it awkward to provide their confidential information throughout the KYC procedure.

Examples: Gemini, Kraken, Coinbase, and Binance

 

Decentralized exchanges (DEX)

Decentralized exchanges operate without a central authority, in keeping with the spirit of Bitcoin. This type of network’s servers are dispersed across computers all over the world, so even if one of them is attacked, the network will continue to function. Many consumers are drawn in by this alone because they are worried about losing their cryptocurrency due to a trading platform security breach.

Decentralized exchanges function more like markets than centralized exchanges, which act as brokerages. Peer-to-peer trading is made possible by them, and their registration requirements are less strict. Lower trading volume, less liquidity, a generally subpar user experience, and a lack of customer assistance are the main negatives of decentralized exchanges.

Examples: dYdX, Bisq, Uniswap, PancakeSwap, and Tokenlon.

 

Hybrid exchanges

A new wave of cryptocurrency trading platforms with the aim of delivering the best of both worlds includes hybrid exchanges. By combining the security benefits of decentralized exchanges with the higher functionality and liquidity of centralized exchanges, they hope to address the drawbacks of earlier exchanges.

Hybrid exchanges, however still a relatively recent concept in the crypto industry, tout quick transaction speeds without sacrificing the privacy of their consumers. Due of their high expenses, restricted scalability, and restricted assets, only time will tell if they will succeed or struggle.

Examples: Nash, Qurrex, Eidoo, and Legolas.

 

What is Crypto Exchange Fee?

Cryptocurrency exchanges impose a variety of fees, and it’s not always obvious what you’ll be paid for. Exchange costs and network fees are the two primary fee categories to watch out for.

Cryptocurrency exchanges are funded by trading fees. They are therefore service charges that cover:

Trading fees, often known as “maker/taker” costs, are levied when transactions are made. Trading costs show whether or not a coin order creates market liquidity. They also hold true when changing currencies.

Deposit fees are levied when users fund their accounts; they are typically paid with a debit card, credit card, or PayPal rather than a wire transfer.
withdrawal charges made when you take money out of your account in fiat currency or a cryptocurrency.

Account fees that are recurring, typically monthly.

Cryptocurrency miners process and secure transactions on the blockchain in exchange for network fees. This is a common expense for centralized crypto exchanges, while some can let consumers pay higher miner fees to speed up transactions. Due to the lack of a middleman between users and the crypto miners on decentralized exchanges, this is typically a fee that users on those exchanges must pay themselves.

 

How to Select the Best Crypto Exchanges?

Functionality and safety should be your top priorities when selecting a cryptocurrency exchange. Whether it’s fiat-to-currency trading pairs, liquidity pooling, or a selection of altcoins and stablecoins, the exchange you choose should support the features you intend to utilize. It should also have extra safeguards in place to ward off hackers, such as two-factor authentication and Bitcoin locks.

Another significant consideration is the platform’s ease of use, which is particularly relevant for novice traders who may struggle with less user-friendly interfaces. The improved usability is not only beneficial for novice traders, but also for more experienced ones.

Geography should also be taken into account. The United States of America is home to a number of different exchanges, some of which are only functional on a state-by-state basis.

Ways to verify the safety and legitimacy of a cryptocurrency trading platform
Keep a watch out for phony websites and applications when searching for a cryptocurrency exchange. Verify the platform is legitimate by looking for things like misspelled words, phony logos, and the presence of a lock icon in the address bar of a website.

In a similar vein, it’s vital to keep in mind that even if you’re careful, trading cryptocurrencies can still be risky. The value of cryptocurrencies can suddenly go up or down, and even the most astute investors can’t always anticipate these swings.

If you decide to invest in cryptocurrencies, experts advise keeping your exposure to less than 5 percent of your whole portfolio.


 

BTCC: Best for Futures and Margin Traders

 

When it comes to buying and selling bitcoin futures, one of the best places to go is the BTCC cryptocurrency exchange. BTCC has founded since June of 2011 and provides traders with a variety of options for tradingcryptocurrency derivatives and futures contracts.

BTCC is a cryptocurrency exchange established in 2011 and headquartered in London, UK. We are the longest running cryptocurrency exchange in the world!

We specializes in cryptocurrency contract trading, offering demo trading, day contracts, weekly contracts, and perpetual contracts, so anyone who is a cryptocurrency investor can meet their trading needs through BTCC.

With the addition of this new product type, BTCC now offers four broad classes of crypto futures: daily, weekly, perpetual, and the newly-added quarterly futures. The versatility in product types allows users to choose and trade futures that best suit their needs and goals.

The launch of these 19 quarterly futures marks the beginning of BTCC’s expansion of crypto product offerings. As BTCC is celebrating its 11th anniversary this year, the exchange is looking to introduce more products to meet the rising demands of its users worldwide.

BTCC FAQs

Is BTCC safe?

Since its inception in 2011, BTCC has made it a priority to create a secure space for all of its visitors. Measures consist of things like a robust verification process, two-factor authentication, etc. It is considered one of the most secure markets to buy and sell cryptocurrencies and other digital assets.

Is it possible for me to invest in BTCC?

Users are encouraged to check if the exchange delivers to their area. Investors in BTCC must be able to deal in US dollars.

Can I Trade BTCC in the U.S?

Yes, US-based investors can begin trading on BTCC and access the thriving crypto asset secondary market to buy, sell, and trade cryptocurrencies.