Cryptocurrencies and Blockchain technology have brought about a revolutionary shift in several processes. Payments have particularly benefitted from the innovative features provided by this technology, not least by giving access to online payments to millions across the world who lack traditional banking services. In this respect, cryptocurrency exchanges have played a vital role, helping to bring digital currencies to the masses.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is simply described as an online platform where you can turn one currency into another. There are thousands of differences exchanges, offering a variety of services and supporting a range of currencies. Many platforms accept traditional, fiat currencies, such as EUR and USD, giving you the opportunity to join the cryptocurrency community. Other exchanges are solely cryptocurrency-based, giving you access to a vast selection of digital coins and tokens.
Types of Cryptocurrency Exchanges
There are several different ways to categorize cryptocurrency exchanges. For example, it might surprise some to learn that even though cryptocurrencies are often described as being decentralized, a substantial portion of exchanges is actually centralized. This means that trading is carried out on a platform with a central entity managing transactions and oftentimes, user access.
The term cryptocurrency exchange stems from some of the first platforms that operated similarly to a commodities exchange. On such platforms, buyers and sellers trade directly based on the market price. The platform normally charges a fee on each transaction.
Another popular type of exchange is a broker, which has proven to be very popular amongst novice traders. Platforms that offer a brokerage service act as the middle-person between buyers and sellers. In this way, no matter whether you are buying or selling, you will always deal solely with the broker. Whilst fees are normally higher than on a traditional exchange, by using a broker you get the benefits of faster and more simplified transactions.
Peer-to-peer trading (P2P) platforms are another popular type of exchange type. Acting as open marketplaces, these platforms let buyers and seller negotiate prices directly, and a fee is normally charged on each transaction. Features on P2P platforms vary significantly, both in terms of security and functionality. Platforms, such as LocalBitcoins, provide a good level of security, whilst giving you the opportunity to buy Bitcoin using PayPal, bank transfer, and sometimes, even cash.
What is Most Important to You When it Comes to Trading?
No matter whether you are going to simply exchange Bitcoin, or if you are a professional trader looking to profit from a coin’s price movements, there are some common characteristics that you should look out for when choosing a platform. The following are a few traits common amongst the best cryptocurrency exchanges:
- Security – Check out the platform’s security reputation, ensuring that it has the systems in place to protect you, your data, and your funds. Encryption, two-factor authentication, and IP logging are just some of these measures.
- Supported Cryptocurrencies – Different exchanges let you trade a variety of digital tokens. Whilst some platforms give you access to just a handful of coins, others specialize in offering hundreds of different ones.
- Supported Payment Methods – In order to fund your account and start trading you need to use a supported payment method. Whether you are using EUR or ETH, you need to ensure that the platform can accept the currency and method you wish to use.
- Fees – Some platforms are designed for professional traders whilst others specialize on novice users. Others still offer different tools depending on your trading needs. All this choice is translated into different fees and fee structures.
Different Platforms for Different Users
The following are some of the best cryptocurrency exchanges based on profiles of different types of traders. It is always important to read exchanges’ reviews before committing.
If you are a novice trader with limited knowledge on trading digital tokens, you should consider opening an account with Coinbase. User-friendly and easy to set up, Coinbase offers a brokerage service that gives you access to several top coins and supports payments in fiat currency through cards and bank transfers.
More proficient traders seeking to get access to a wider choice of coins and wanting to try out advanced trading should consider eToro. This global trading platform lets you exchange Bitcoin whilst also investing in cryptocurrency Contracts for Difference (CFDs). eToro offers a comprehensive choice of payment methods and has some of the lowest fees in the industry. Their fees are very simple and easy to understand, you can learn more here.
If you are seeking to buy Bitcoin or Altcoins whilst staying relatively anonymous, Changelly is amongst the best cryptocurrency exchanges to let you do just that. Supporting payments in fiat and cryptocurrency, the platform is easy to use, with low fees and fast trading.
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