Cryptocurrency is now becoming more of a necessity than a fad because of the many positive benefits it provides users. Quicker than quick transactions, tight algorithms for heightened safeguarding against security breaches, there seems to be no stopping this commodity that’s taking over the world a blockchain at a time.
To understand more about bitcoin and bitcoin exchanges, here’s a brief overview of what it is, along with how they work, and other cryptocurrency updated need-to-knows.
What Are Bitcoin Exchanges?
It’s when you exchange other currencies to buy bitcoins. This “exchange” can be done on online platforms which act as mediating bodies to complete the transaction. Call it a buying and selling of bitcoins for other currencies, and the other way around.
Fiat currencies, or the currencies that are supplied and backed by governments (e.g. each country or territory has its own fiat currency— you’ll see it in the coins and printed bills you carry in your wallet). These fiat currencies, along with altcoins (other types of cryptocurrency that emerged soon after Bitcoin did), are traded for bitcoins.
Bitcoin Exchange FAQs
Bitcoin Exchange Terms
In cryptocurrency language, every transaction has a “maker” or what you’ll understand as the seller, and a “taker”, simply known as the buyer. But don’t let this terminology confuse you in any way. The process itself is as simple as exchanging your currency for that of bitcoins, or the other way around.
How Bitcoin Exchanges Are Made
Much like fiat currency exchanges, trading yours for bitcoins has a fee as well. The fee for the service of exchanging currencies isn’t extravagantly high, so you shouldn’t have to worry about that. In fact, they’re considered relatively economical when compared to other bank transaction fees of the same.
So then how is it done? Through regular means of deposits? Bank and wire transfers are among the most common methods. And the same is true if the conversion will be between cryptocurrencies. This isn’t limited to only fiat to cryptocurrency exchanges. For the first, there’ll still be a fee for the trade-in, but again, it will be very reasonable.
Can This Be Done Internationally?
Yes. Definitely. The process will be the same. You are to make a deposit and the intermediary body (bank, wire transfer agency, etc.) will convert that into the cryptocurrency, in this case, bitcoin, of your preference. As a head’s up, there may be international fee charges on top of the whole. And you’ll have currency conversion fees on top of the actual transaction fees themselves.
According to surveys, international exchanges and transfers have been growing exponentially as of current, what with the ease that said crypto currency exchanges offer. Additionally, more and more people are relying on bitcoin exchanges especially in sending money abroad. This is also true with b2c (business-to-consumer) dealings. That is, when the business allows bitcoins as payment.
What Are Decentralized Exchanges?
Decentralized exchanges are open doors for what’s called peer-to-peer transactions without a “centralized” or third party mediatory body where funds can be held. In other words, these types of trades are, in a way, direct and occur through the means of an automated system.
DEXs can be done on cryptocurrency platforms that are created specifically for these types of operations. Although there have been a few issues of fraud occurring much more frequently with DEXs, innovations in security algorithms have allowed them to have increased security for users.
DEX protocols, database orders, GUIs or Graphical User Interface, and APIs or Application Programming Interface are some of the basic methods of organization for platforms that run decentralized exchanges. Still, DEXs are relatively new and experts have revealed that it currently warrants more testing to be rendered as secure as their centralized counterpart. This is probably also why it’s a little lacking with regards to user-friendliness.
Is A Bitcoin Wallet Different From A Bitcoin Exchange Platform?
The answer to that is a “yes”. A bitcoin wallet is merely a “place” for you to keep your bitcoins. An online wallet, if you will. On the other hand, a bitcoin exchange platform is the intermediary body that will process bitcoin exchanges from you to the “taker” (buyer), and the other way around.
Some bitcoin exchange platforms will even provide bitcoin wallets for users. Whether one is better than the other, that you either have a bitcoin wallet outside of said platforms or within, doesn’t have that much of a significant effect.
If you want to have a bitcoin wallet with no strings attached to exchange platforms, you can download them through your mobile phone’s carrier App store. The next query you have in mind probably has to do with whether you have a bitcoin wallet and downloading and maintaining the app is free.
Well, there are bitcoin wallet apps that don’t cost a thing. Free? Yes. But to clarify this, it will depend on the type of app you choose. Most “beginner” wallets are.
You will only have to pay for a bitcoin wallet once you go a notch higher— hardware wallets. The reason behind the fee is security. It’s been said that hardware wallets are that much more protected than mobile, desktop, or web wallets. Having said that, bitcoin wallets already are, in general, guaranteed safe since only you will have access to it.
How To Get Started With Bitcoin Exchanges
If you already have a bank account open, you can ask a banking specialist to assist you with this for a manual bank transfer from your account to that of verified bitcoin sellers, whether nationally, or internationally.
Much like other transactions that involve a fiat currency, signing up for bitcoin exchanges will require certain verification processes, too. Once you’re asked to register, you’ll be asked a series of questions to authenticate that you are who you say you are, and more. Nothing complicated. After being signed on, you can already start exchanging currencies.
As you grow your account and decide you want to either send an amount or withdraw it, you’ll go through the same channels like bank transfers, wire transfers, money orders, credit and/ or debit cards, etc. You can even convert it to gift cards should you wish to. Other platforms now allow PayPal transfers and check drafting as well.
Bitcoin Exchange Image by Voytek Pavlik from Pixabay.