Bitcoin has emerged as a revolutionary entity in the cryptocurrency world. It has witnessed a steep growth around the globe in the previous years. Being convenient mode of payment as well as a mode of exchange using cryptocurrencies and fiat currency, Bitcoin is being accepted mainly by investors and merchants both.
Furthermore, the increased use of bitcoin in trading and investments gave birth to online exchanges. These exchanges play a vital role in this grooming phenomenon. The crucial component of exchanges is setting up of standard rates for bitcoins against fiat currencies (such as the United States dollar, EURO).
In addition to standardization of bitcoin prices, these exchanges facilitate the investor to buy/sell bitcoins against fiat currencies and vice-versa. You can also see the price trends using these exchanges. In short, Bitcoin exchanges work similar to the traditional exchanges.
What are Bitcoin Exchanges?
Bitcoin exchange, to define it more technically we can say that these are digital marketplaces for both the buyer and seller to buy or sell bitcoins against other cryptocurrencies as well as fiat currency. The exchange acts as a middleman (intermediary) between buyers and sellers. For each transaction happening over these platforms, they charge a certain transaction fee.
Additionally, the Bitcoin exchange verifies the authenticity of each buyer and seller who wishes to use the services extended by it. This verification process is also known as “Know Your Customer (KYC).”
Bitcoin Exchanges Growth spectrum
Majority of the business related to bitcoin lies at Bitcoin Exchanges, as these are the essential component of virtual currency world. Their primary role is buying or selling bitcoins, using fiat currency or other cryptocurrencies.
There are many Bitcoin exchanges established in the last couple of years. These exchanges may differ from each other in nature and working principles. For example their languages, location or country of operations, currencies supported. By these unique set of features they may attract customers.
On the other side, these exchanges must have proof of their authenticity. In 2018, the US Securities and Exchange Commission maintained that “if a platform offers to trade of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.” The Commodity Futures Trading Commission now permits the trading of cryptocurrency derivatives publicly.
Bitcoin Exchange Vs. Bitcoin Wallet
The comparison is quite a debatable topic that, out of ‘Bitcoin Exchange’ and ‘Bitcoin Wallet’ which is more secure, transparent and trustworthy. Besides their advantages or disadvantages, both of these have played an essential role in the crypto economy. Here we have compared them on the basis of their merits and demerits.
|Bitcoin Exchange||Bitcoin Wallet|
|No Direct Ownership||Direct Ownership|
|Buy and Sell Bitcoin||Mode of store|
|Help keeping track of your bitcoin||Owner’s responsibility|
|Slow speed transactions||Faster Transactions|
|Easy Account Recovery||Only accessible with a paraphrase|
Pros and Cons of Bitcoin Exchanges
Bitcoin exchanges are trendsetters, they keep track of your bitcoin. Like a bank account, you can keep deposited your bitcoins as well as buy or sell using bitcoin exchange. As a whole, they have yet to prove their security and transparency, whereas some exchanges have come out well on this touchstone.
On the other side, most of these exchanges are not decentralized; they share partial control and you are bound to trust them to keep safe your bitcoin’s private keys against hackers or any other security threats. They keep on improving their security parameters but still a way to go.
The usabaility to buy bitcoins using bitcoin exchange have undoubtedly grown in the recent years. This growth is directly proportionate to the grown interest of public in buying and selling bitcoins. Moreover, bitcoins are being widely accepted as mode of payment.
Bitcoin exchanges, keep changing trends and maintain the record of price modifications. You need not to worry about the fluctuating prices at every point of time. Although no exchange market is 100% secure, Bitcoin Futures markets will provide one of the safest ways to trade Bitcoin. The online threats are always part of this industry, even for those who are technically advanced with Bitcoin.