- What is crypto exchange?
- Beginning of work.
- Important indicators.
- Differences between crypto exchanges.
- Popular platforms.
- Decentralized crypto exchanges.
- Useful links.
Crypto exchange is a digital platform, on which is traded electronic money and conventional currency (USD, EUR, etc.). For trading of each crypto currency is used own ticker, for example, BTC (Bitcoin), XRP (Ripple). During the trading operations, crypto exchanges write off commission for purchase / sale of currency. It’s volume depends on the platform. For example, Poloniex writes off from 0 to 0.25%, Kraken’s commission is 0,36%. Exchanges are the most important tool for earning on crypto currencies. You can easy invest in these platforms. In addition, there is possibility of constant trading. Without this instrument, it’s impossible to build up a capital.
A few years ago, crypto exchanges could be divided into those, where only bitcoin and usual currencies are trading, and those, where you could buy and sell different digital coins. However, now virtually any crypto exchange offers a wide range of trading assets. Therefore, today crypto exchanges are divided into a centralized and decentralized. The centralized crypto exchange operates on interconnected servers, which belong to one particular company. It should be understood that in the case of a hacker attack, such a crypto exchange may not be able to protect it’s data, and clients’ funds will be stolen. In this situation, the digital platform can compensate customers for losses, but this doesn’t always happen. Much more secure in this regard is the decentralized crypto exchange. The data of such a trading platform are distributed on a variety of servers, which are scattered around the world. Such an effect is achieved due to decentralized crypto exchange that operates by blockchain technology.
Consider several common types of crypto exchanges:
- Trading platforms. They connect traders and receive a commission for each transaction.
- Direct trade. At these crypto exchanges, each participant sells a cryptocurrency at own price. The market price of digital money is absent.
- Brokers. On these resources, cryptocurrency is sold at prices that set by platform’s creators. Market prices are also absent.
- Funds. They are pools with professional management, in which you can buy and hold assets in digital currencies.
Trading on crypto exchanges is carried out at currency pairs. For example, BTC / XRP allows transactions between Bitcoin and Ripple cryptocurrencies. In the absence of a trading pair, it’s impossible to conduct transactions. The same rule applies to fiat money.
To begin work on digital platform, you need to go through several stages:
- Registration on digital platforms is free and doesn’t present difficulties. At some sites for additional features, you need to pass additional verification. It includes the sending of passport data and other documents. Unfortunately, with this is lost client’s anonymity.
- Transfer of funds to account. You can add funds to your account in several ways. The first is to transfer digital coins from your electronic wallet to the address of crypto exchange. The second is to replenish account using the usual currency. In fact, there are more options for replenishing the account. It depends on chosen crypto exchange.
- Creation order for transaction. Crypto exchange is a digital platform on which clients places lots for purchase / sale at any a cost. This cost can significantly differ from the average market price.
The main income of crypto exchanges is the commission for conducting transactions. Their size depends on the site. At the same time, the main source of clients’ income is the high volatility of the cryptocurrency courses. You can trade both on courses of usual currency, and on the relative fluctuations of digital coins. The more options a crypto exchange offers, then better for client.
(growth number of Bitcoin’s wallets)
Today there are many different crypto exchanges. They provide their clients many opportunities to trade. Trader must examine various indicators of platforms in order to choose optimal crypto exchange for himself.
For an investor, the following indicators will be important:
- Amount of commission for input / output of funds;
- Restrictions on amount of withdrawal;
- Presence of trading pairs;
- Complexity of verification;
The trader should consider the following possibilities of crypto exchange:
- Instruments of trade;
- High-quality currency charts;
- A large number of trading pairs;
- Good security, because most of the funds will permanently trade on crypto exchange.
At the same time, an ordinary user who simply needs to exchange funds should pay attention to following aspects:
- Availability of required trading pair;
- Speed of input / output;
- No negative feedback about delay and impossibility of withdrawing funds;
- Complexity of verification;
It’s best to focus on crypto exchanges, which have the largest volume of trades. The more people have chosen a resource, then more reason to trust. It’s worth noting, that crypto exchanges, which offer a large number of trading pairs and withdrawal capabilities, often delay transactions and have malfunctions. This is explained by the large number of people that wish to withdraw or exchange an unpopular currency.
The client should not forget about the general rules, look at the real facts (trading volume, fluctuation of rates, reviews) and don’t succumb to loud promises of crypto exchange owners.
Crypto exchanges work on one principle. But to attract new clients, each of them offers unique opportunities. Due to this, each user can choose the most suitable platform for himself.
Consider the most important differences between crypto exchanges:
- The volume of trading pairs. Some exchanges offer only the most popular cryptocurrencies. On others, users can trade in hundreds of pairs;
- Withdrawal of funds. Each exchange establishes its list of currencies, which client can withdraw;
- Transactions with usual currencies. Some exchanges work only with crypto-currencies without the participation of usual currencies (USD, EUR, etc.);
- Commissions. All crypto exchanges charge commissions for conducting transactions. Differences are in their volume. Some platforms accept commissions only from buyer. However, other exchanges charge commissions from both buyer and seller.
- Information about clients. Some exchanges are limited to a standard e-mail request, while others require a verification procedure. It consist of scanning copies of various documents.
- Account protection. Somewhere for enter to crypto exchange is enough a password. Somewhere you need to go through a complicated login procedure with confirmation of various data.
- Variants of input / output of funds. Each crypto exchange has own set of possibilities for input / output of funds.
- Daily trading volumes. Some exchanges carry out trade operations for more than $ 2 billion per day, while others don’t reach and $ 100 thousand.
Some digital platforms offer additional opportunities for their clients. Among them:
- Detailed charts and other trade instruments;
- Accrual of percent on deposits;
- Referral programs;
- Availability of mobile applications;
|Daily trading volume ($ million)||1000||243||330||266,51||424,61|
|Number of currency pairs||906||59||365||6||35|
|Limit withdrawal of funds (per day)||to 100 BTC||to $50 thounds||to $25 thounds||to 100 BTC||missing|
|Ways to replenish a balance||wallet||wallet, transfer||wallet||wallet, transfer, bank card||wallet, transfer|
(differences between crypto exchanges)
Today there are many different crypto exchanges. They have similar functionality. But to attract a large number of clients, each crypto exchange is trying to create unique conditions for its users. Therefore, they can differ significantly from each other.
Consider the most popular and famous crypto exchanges today:
- Bitfinex is one of the largest crypto exchanges in terms of trading volume (about $ 424 million per day). The platform supports 65 currency pairs. There is a possibility of withdrawal in 26 currencies. For withdrawal of dollars is required verification of user. For accomplishing other operations will suffice e-mail. In August 2016, exchange was hacked. However, it managed to resume work due to its functionality, good technical support and a good set of tools for traders.
- Bittrex is one of the largest crypto exchanges in terms of the number of pairs. The number of users is growing, and with them daily trading volume grow. It has already exceeded $ 1 billion. To withdraw funds is required verification of the account. A few negative reviews are associated with difficulties in withdrawing funds.
- GDax has risen markedly in trading volume (more than $ 2 billion). Negative feedback is very small. Platform include only 9 trading pairs and 3 withdrawal currencies – Bitcoin, Litecoin and Ethereum.
- BitStamp. The daily trading volume is about $ 340 million. This crypto exchange supports Bitcoin, Litecoin, Ethereum and Ripple. Negative feedback is extremely small.
- Kraken is an interesting crypto exchange that supports 47 trading pairs and withdraws funds in 17 currencies. There is a possibility of margin trading, a mobile application. Platform distinguished by a decrease in commission with growth of user’s turnover. The trading volume is $ 243 million.
- Poloniex was very popular recently, which was explained by presence of 99 trading pairs, the ability to withdraw 68 currencies, a good level of account protection. The crypto exchange allowed creating pending orders, offering the possibility of margin trading and financing. But tech support worked slowly, there were failures. At the end of 2017, there were many complaints about the freezing of accounts at unexplained reasons. Now the trading volume fell.
- Binance. A relatively new crypto exchange, which began work in 2017, and during this time it gained popularity among users. Now crypto exchange is in the TOP-5 by the daily trading volume. The digital platform stands out low commissions and fast processing of transactions. The Binance technology allows processing up to 1.4 million orders per second.
- Exmo. One of the most famous crypto exchanges in Europe. The platform works more than 5 years. Traders are not afraid to store significant amounts of money here. The headquarters is in England. The crypto exchange has a large number of active traders from more than one hundred countries in the world.
The work of crypto exchanges is built on the trust of users. Therefore, clients should remember that it’s not worthwhile to transfer large funds to new exchanges, even if they have useful functions and options. Better to start with a small amount. Only time will show the seriousness of the project. Also it’s worth remembering, that only a thorough market analysis and good awareness allows traders to earn a solid income.
Recently, users increasingly criticized the work of crypto exchanges. Decentralized opportunities for using digital money actually clash with regulatory centers. This negatively affects the safety of funds.
Often there are situations where the owners of trading platforms, on personal initiative or at the request of regulators, freeze or block user accounts. They are also vulnerable to hacker attacks, which often coincide with sharp price jumps. Due to slow operation of servers, clients don’t have time to respond to market changes, that leads to large losses in addition to the standard theft of passwords and funds.
Therefore, platforms are being developed that offer a decentralized exchange of cryptocurrencies. They work at the technology of smart contracts, all data are recorded on blockchain. This approach ensures the reliability of the network both from centralized intervention and from hacking.
The disadvantage of such decentralized crypto exchanges is bandwidth. Platforms successfully solve it. They offer various concepts and technologies that provide high-speed data processing.
Among blockchain-projects allocated multicurrency wallets with automatic conversion function. This technology doesn’t allow full-fledged trading at cryptocurrencies.
The functional of some applications offers investment tools, which allow the owner to convert funds into the most promising cryptocurrency. The range of possibilities for development of such ideas is quite wide. Most analysts believe, that over time most users will switch to decentralized crypto exchanges.