If you’ve been reading about CoinDogg, chances are high that at this point in time you are familiar with cryptocurrency exchanges. But what you might not know is how one works in the back-end. As such, to get you to a level of better understanding here’s everything you need to know about crypto exchanges.
A cryptocurrency exchange is essentially a digital marketplace where traders can buy as well as sell crypto through the usage of different FIAT currencies or altcoins. It acts as the intermediary between buyers as well as sellers of the cryptocurrency.
The platform essentially matches buyers with sellers. This is very similar in the sense of a traditional stock exchange, where traders can opt to buy and sell bitcoin through inputting a market order or a limit order. When a market order is selected, the trader is authorizing the exchange to trade the coins for the best price available, and with a limit order set, the trader directs the exchange to trade coins for a price that is below the current ask, or above the current bid. This is specified if they are selling or buying.
To transact a cryptocurrency on an exchange, the user has to register with the exchange and go through a few verification processes to authenticate their identity. Once this authentication is successful, an account is opened for the user who then has to transfer funds into their account before buying the coins.
Keep in mind that different exchanges offer different payment methods that can be used for depositing funds, and some even include bank wire transfers, direct bank transfers, credit cards, debit cards, gift cards, and the list is endless depending on the exchange in question.
There are two types of exchanges, including Centralized Exchanges and Decentralized Exchanges.
Centralized Exchanges are the platforms that facilitate the buying as well as selling of cryptocurrency through fiat currencies or between digital currencies. They function as a trusted intermediary in trades and often act as custodians through storing and protecting your funds.
Then you have Decentralized Exchanges, and these are the ones that are operated without a central authority. These exchanges allow for peer-to-peer trading of digital currencies without the need for an exchange authority to facilitate the transactions themselves. There are a number of benefits to decentralized exchanges, as they do not require much personal information from their owners than other types of exchanges do. If users transfer assets directly to other users, that eliminates the need for the transferring of assets to the exchange.
In any of the above cases, however, making deposits and withdrawals does come at a price, and this is highly dependent on the payment method that is chosen to transfer the funds themselves. The higher the risk of a chargeback from a payment medium, the higher the fee. This makes bank draft or wiring money to the change a lesser risk of a chargeback compared to funding your very own account with different payment methods.
Traders can also expect currency conversion fees, depending on the currencies that are accepted by the exchange. Each and every exchange has a transaction fee that is applied to each completed buy and sells order that is carried out on the exchange.