Cryptocurrencies much like stocks are untradable without an exchange. The cryptocurrency exchange sector is comprised of digital and brick and mortar exchanges where different currencies can be traded. Cryptocurrency exchanges are commonly referred to as Digital Asset Exchanges. The trade of currencies can be trading fiat for cryptocurrency, trading cryptocurrency for fiat, or exchanges between one cryptocurrency and another. There are hundreds of crypto exchanges that operate only in specific regions such as Golix in Africa.
Currently, more than 500 cryptocurrency exchanges are in operation worldwide. Soon aassio will launch one of the first crypto exchanges based in Germany.
Fundamentally speaking, every crypto exchange provides the possibility of converting one cryptocurrency to another one — usually paired to the most common coins respectively tokens like Bitcoin and Ether. Based on that the crypto market furtherly differentiates between two main types of exchanges:
1.Fiat-to-crypto exchanges like Coinbase:
These exchanges usually offer a limited range of cryptocurrencies — but are providing the possibility of ‘onboarding’ Fiat money like US dollars or European Euros via credit card or bank transfer.
2. Crypto-to-crypto exchanges like Binance:
These exchanges are focussing on offering a much wider range of cryptocurrencies and trading pairs for diversifying the previously on boarded capital.
Some would argue that trading platforms which offer cryptocurrency betting on contract for difference also known as CFDs should be listed here as well, but they should keep in mind that a traded CFD doesn’t represent a purchase of that particular coin or token — instead it is more comparable to a contractual agreement between two parties just referring to a specific coin/token.
One of the hurdles in choosing the right cryptocurrency exchange is ensuring that it is a safe platform for making your trades and meets local and international laws where it operates and as applicable. The regulation around cryptocurrency exchanges has made them a target for scrutiny by many industrialized nations. Foreign currency trading known as Forex was previously a highly regulated domain of a few key providers who set the rates for the entire world each day with little variation between individual buyers and sellers. Now with alternative currencies introduced into trading, the same institutions are no longer manning the gate. New legal frameworks are being put into place to meet the demand for cryptocurrency trade. Each cryptocurrency exchange has its own set of parameters for making trade based on their business models and legal frameworks.
Cryptocurrency interfaces vary widely with some having easy to use, intuitive dashboards and great user UX others require much high levels of technical knowledge and do not provide any user interface at all. Each exchange has its own pros and cons. The differences between cryptocurrency exchanges are typically in the features that each provides and the transaction fees charges. Some exchanges have their own built in wallets and others do not. Others provide for direct transactions to and from bank accounts while some only allow for credit card purchases. Large exchanges can allow you to buy in large volumes due to their high volume of transactions while smaller exchanges can have caps and limits. Some exchanges can automatically make purchases for you on set schedules.
Another variable is the identification required to trade and make purchases. Some exchanges require photo identification and others only require an email address. This varies in part due to the size of the transactions allowed and the laws regarding the trades in the countries where the service is based.
Security should always be something you look for when deciding which crypto exchange to use. The best way to protect your blockchain based crypto assets is to download them and have them offline in what is called cold storage. Various services offer different levels of encryption and security. It is also good to examine the system uptime to ensure that you will later have access to your account.
Cryptocurrency exchanges can also operate on a variety of platforms. Some are available only online, some as software downloads, others as mobile applications for your smartphone and even some who work only on Linux. Some offer APIs to plug into your other software to make direct bank payments.
As with any online payment system or other software, it is important that you select an option with good customer service support. Of course, we all hope that nothing will go wrong and that we will never need to contact support, however, knowing that they will be available when you need them and that they can promptly attend to your issues is a key attribute your selection process should consider.
Stay tuned for next week’s blog post to learn more about our very own aassio crypto exchange designed in Germany paving the way to future living through real estate tokenization! We are excited to share the details with you and hope you will enjoy reading about the future of blockchain.
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