What is a Cryptocurrency Exchange – Crypto Beginner’s Guide
If you have heard of cryptocurrency or know anybody who has some, they were able to get it from an online platform called a cryptocurrency exchange. It is these cryptocurrency exchanges that allow you to purchase, or even trade one cryptocurrency for a different one, or simply sell your cryptocurrency and cash out. So to put it simply, a cryptocurrency exchange is basically a crypto stock exchange or currency exchange, like at the bank or the airport.
Like everything else, there are different types of cryptocurrency exchanges, and depending upon what type of exchange you are using, you will be able to do different things with them. Here are some of the different types of cryptocurrency exchanges and what they can do for you.
The ‘Traditional’ Cryptocurrency Exchange
You can relate these types of exchanges to the traditional stock market. Sellers and buyers will trade based on the current price of a cryptocurrency, and the exchange can be considered the middleman who handles the transaction.
With these ‘traditional’ exchanges, there is normally some type of fee involved for each transaction that you make. While there are some exchanges that only deal in cryptocurrency, others offer the opportunity to buy and sell with flat currencies (such as the U.S. dollar) and exchange them for a cryptocurrency (such as Bitcoin).
The Coinbase Pro exchange is the perfect example of an exchange that allows you to buy crypto with fiat currencies, while Kraken is an exchange where you can trade one type of cryptocurrency for another. While these types of exchanges do have a middleman, there are also exchanges that do not have a middleman. These are referred to as peer-to-peer exchanges, such as EtherDelta.
A Cryptocurrency Broker
With this type of exchange, think of changing currency at the airport. These exchanges allow you to buy and sell different cryptocurrencies at prices that have been set by the individual broker. These website-based exchanges will typically use the current market price of the coin you are trying to buy, but add a small premium onto it.
Coinbase is the perfect example of the cryptocurrency broker platform. Another popular cryptocurrency broker is Shapeshift. They provide a service that is very similar to Coinbase, but let you trade one type of crypto token for a different one. A cryptocurrency broker is by far the best and simplest way to get started in with crypto if you are a new user. It really is simple and easy. You will be paying a slightly inflated price than on other exchanges, but those other exchanges are not as new-user friendly.
These types of exchanges offer a direct peer-to-peer trading opportunity between those who are trying to sell, and those who are trying to purchase. With peer-to-peer, there is no fixed market price. The seller will set their own price that they are willing to sell at. This type of platform is definitely not the best one and is advised that you stay away unless you know what you are doing and are very familiar with cryptocurrency.
If you are ready to start dabbling in the cryptocurrency world, your best bet is to use a broker or an exchange. They are easy to use and very user-friendly.