What is a Bitcoin Exchange?
Bitcoin is a digital currency that anybody can own and transact with and there is an entire ledger record on the digital system that makes sure that transactions are secure and that there is no chance of unexpected liquidity injections into the system.
Modern fiat currencies like the USD, Euro and Pound and traditional payment gateways like VISA, Mastercard, etc. do not inspire so much confidence in their usage as they have in they have been known to be prone to cyber-attacks in the past. Although, we have seen less of this over the last couple of years with crypto and blockchain technology becoming more robust and secure.
Why do crypto enthusiasts love crypto so much?
Money as most know it, AKA FIAT Money, is and can be manipulated at a large scale by respective governments. The governing systems ‘corrupts’ the value of these currencies with constant liquidity injections, thus making the currency less and less valuable with time. For example, the Dollar’s total supply is constantly being increased by the US Federal Reserve.
Since there is no Gold standard anymore, the extra currency being introduced in the system means that the money people who hold will lose value with time. The current inflation rate in the US is expected to cross 2% which is the highest increase in more than a decade. Based on this rate, the US Dollar is projected to shed 2% of its value in one year. With interest rates dropping to around zero, the money you hold will get less and less valuable with time while the cost of living will keep on increasing.
The same issue is not present in Bitcoin. There are no sudden liquidity injections that are introduced into Bitcoin’s ecosystem. All new currency entering the market are predetermined and thus, limited. So, inflation unlike conventional national currencies is not possible.
Overall, Bitcoin is a digital currency that promises security, incorruptible practices, decentralization and safe transactions the likes of which have never been seen before in entire human history. After the success of Bitcoin, literally hundreds of new cryptocurrencies have also been launched over the years. They include Ethereum, Ripple XRP, Litecoin, Bitcoin Cash, etc. In fact, over 6000 new coins have been launched but there are only some we survive.
How do you Buy/Sell/Exchange Bitcoin and other Digital Currencies?
How do you buy and transact with such a revolutionary new cryptocurrency?
A currency is as good as its ability to be exchanged with other assets around the world, starting with other currencies (both fiat and crypto/digital ones). If you have a certain amount of digital currency, you need to be able to exchange it for another asset whenever you want. This will allow you the option to cash out whenever necessary as well as the ability to buy more when you need to.
You would also want to have the option to switch between different digital currencies too depending on the market prices as you might find a potential opportunity to increase the value you hold. Nowadays there are many options on how you can buy, sell, trade and store on crypto markets.
Back when Bitcoin and the whole concept of digital-only currencies were new, if a person needed to buy a digital currency, he could only do P2P transactions. That means that if person A had some Bitcoin he could find and contact another person B who is willing to buy some of his Bitcoin and then a transaction would take place.
Now, P2P transactions are slower and there is always a problem in their effectiveness as the currency’s usage increases. Users need instant currency transactions with local fiat currencies like USD, GBP, EUR and others as well as the ability to transact with other cryptocurrencies. This is when the first Bitcoin exchanges began to make their way on the crypto scene to allow bitcoin trading.
The first exchange to offer Bitcoin buying/selling opportunity was bitcoinmarket.com that started its operations back in March 2010 but since shut the doors. Now we have an abundance of crypto trading exchanges to choose from and to name a few, Binance, Coinbase Pro, Poloniex, Bitmart and Bittrex, there is a long list so I’m sure you will find the one that is right for you.
Personally, I like to use Binance. Binance is the biggest crypto exchange and has all the tools you need. Although, I don’t trade manually on Binance through! I always automate my trading. Which leads me into saying that if you love to trade crypto or want to start trading crypto check out Yanda.io as they have partnered with Binance to give you the benefit of having your crypto stored on a Binance wallet but they also give you the power of a Binance bot to trade markets automatically for included when you open an account.
Yanda is an automated crypto trading platform that provides automated trading bots for Binance. Sign up for free here.
Let’s get back to the article.
What did Bitcoin Exchanges have to Offer?
The promise of cryptocurrency exchanges was simple; you could buy/sell cryptocurrencies remotely and instantaneously without needing to go through the tedious P2P process. It was inspired by various digital software-based exchange programs that were being floated around at that time that offered trading services in the stock markets, forex, commodities, and were becoming successful. So, a cryptocurrency exchange took the queue from these conventional asset exchanges and offered a cryptocurrency-specific exchange solution. On these exchanges, instead of trading stocks, the users would be able to trade digital currencies.
These included conventional cryptocurrencies like Bitcoin, Ethereum, XRP and others as well as various dollar-pegged digital currencies like USD Tether. Various trading pairs were soon made available on these exchanges and soon, their business expanded across the world as the digital currency sector kept on improving and increasing its trading presence.
These cryptocurrency exchanges despite being centralized in many aspects have become a mainstay of the crypto world and most of the trading around the world takes place through them. Most of the people looking to buy Bitcoin and other cryptocurrencies buy it through these exchanges.
Nowadays exchanges have evolved a lot. There are exchanges just offering Bitcoin Futures and other derivatives while there are exchanges that offer hundreds of cryptocurrencies pairs for trading purposes. With time, innovation has improved these exchanges while increasing their security features and becoming part of the international trading and investment world. New crypto exchanges are also starting to take to the scene known as DeFi exchanges, but we will leave this for another blog post soon.
Are you ready to start trading Bitcoin?