There are many different ways to buy and exchange cryptocurrencies on the market.
These are cryptocurrency exchanges, brokers, direct exchange platforms and cryptocurrency funds. But what are they different from each other? What is worth paying attention to when choosing these services?
Cryptocurrency exchange platforms enable trading in cryptocurrencies, both through their exchange into traditional fiat currencies (and vice versa), as well as other digital assets.
Some platforms are market-makers that draw spreads between buy and sell prices as transaction fees for their services. Others, however, charge for access to the platform. Some of these platforms are physically existing businesses that rely on both traditional payment methods and cryptocurrency payments. Others, however, operate exclusively online, trading electronically sent money and digital currencies. Blockchain.io is a good example of this type of exchange. But this one has even more to offer.
It is important to distinguish between different types of cryptocurrency exchange platforms:
Traditional cryptocurrency exchanges
These are exchanges that operate just like ordinary stock exchanges, where buyers and sellers make transactions depending on the current market price of cryptocurrencies. The stock market acts as an intermediary here. Trading platforms of this type usually require a fee for each transaction. Some exchanges offer only trade in cryptocurrencies, while others allow users to exchange traditional fiat currencies, such as the US dollar for cryptocurrencies or Euro for cryptocurrencies.
Examples of traditional cryptocurrencies are Kraken and GDAX, owned by Coinbase.
Some of the cryptocurrency exchanges require third-party mediation, while others are decentralized and are based on direct user traffic (P2P). Examples of decentralized exchanges are EtherDelta, BitShares, Oasis DEX.
They offer cryptocurrency exchange platforms that resemble ordinary currency exchange offices. They enable customers to buy and sell cryptocurrencies at the price created by the broker based on the market price with an additional bonus, which is brokers profit.
Coinbase is an example of this type of platform. A similar platform is ShapeShift. Although such platforms require slightly higher fees than cryptocurrency exchanges, they are easier to use for new users.
Direct exchange platforms
They allow for direct P2P transactions between buyers and sellers, but without the use of such exchanges as, for example, GDAX. Direct exchange platforms usually do not use established market prices. As part of such platforms, sellers offer their own conversion rates, and buyers try to find the other side of the transaction. They can make OTC exchange transactions or offer exchange rates, after which they would like to buy a given cryptocurrency. The task of the platform is to allow the transaction to be concluded on both sides on favorable terms. This solution is not always the best, but it can be the only option for users in some places around the world. Deciding to use this solution, it is worth checking the market prices of a given cryptocurrency, for example on sites such as CoinMarketCap, to make sure that we do not overpay.
It is a form of collective investment in cryptocurrencies. The huge amounts of assets accumulated in such funds are managed by professionals. Funds enable the public to acquire and keep cryptocurrencies in them. Thanks to them, you can invest money in cryptocurrencies without the need to buy or store them in a direct way.
One example of such funds is the GBTC.
How to choose the right cryptocurrency exchange platform?
Choosing the most suitable platform for the beginners can be difficult because there are many on the market. It should be taken into account that there are two types of such platforms. One of them enables the exchange of traditional currencies, while the other one enables the exchange of some cryptocurrency with other ones. The choice of the platform depends on which currency you want to use.
High popularity is very popular among others Coinbase, Bitpanda, Kraken, LocalBitcoins, Bitfinex, Poloniex.
Each platform offers something different, so it’s worth getting acquainted with their offer before making a decision.
When choosing a cryptocurrency exchange platform, it is worth taking into account such factors as reputation, fees, payment methods, verification requirements, deposit limits and withdrawals.
It is also worth considering factors such as hacker attacks. For example, the Coincheck exchange lost $ 530 million tokens belonging to users as a result of a hacker attack.
The last, but not least is cryptocurrency storage. Storing cryptocurrencies on the exchanges seems a convenient way, because you can use these funds at any time, but it can be risky and is not recommended.
In general, cryptocurrency exchanges are susceptible to hacker attacks and by storing their funds on them, you can easily lose them, so the new users interested in cryptocurrencies, should be familiar with the offer of various platforms, and also think about the security of their funds.
Let me take this opportunity to present the Blockchain.io cryptocurrency exchange and payment system that offers a revolutionary and highly-advanced state of the art solution for cryptocurrency traders. Blockchain.io main advantage is a combination of a hybrid centralized and decentralized exchange based on a high availability and high scalability trade matching engine.
Due to the Blockchain.io cooperation with Paymium, which has a proven security and technological record, the exchange from traditional fiat currencies to the cryptocurrencies will now take place in one environment, so there is no need to transfer funds between outside exchanges. Moreover, in terms of funds security, Blockchain.io will offer encrypted cold storage, cryptographic proof of reserves and fair-exchange protocols to eliminate the counter-party risk.
It is worth to mention here another great aspect of Blockchain.io exchange: the technology used in Paymium’s everyday operation has made this exchange (and due to the merge will spill over to https://blockchain.io/ as well) hackers-proof since the day of its inception in 2013!
Visit Blockchain.io for more information and join the whitelist to become a part of the cryptocurrency exchange of trust on the Internet of Value!