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TechnologyCrypto Exchanges: Working, Difference between Exchanges and Wallets and Some Popular Exchanges

14:20  24 august  2021
14:20  24 august  2021 Source:   pressfrom.com

Cryptocurrencies are virtual currencies that allow their users to make purchases and pay digitally without involving any intermediaries. In order to buy and sell cryptocurrencies, a bitcoin exchange is required. In this article, we will read what bitcoin exchanges are, how they work, the differences between exchanges and wallets, and some popular exchanges.

Bitcoin exchanges are the digital marketplaces that allow users to buy, sell and convert cryptocurrencies. Some exchanges support both cryptocurrencies and fiat currencies. It is crucial for users to do proper research while choosing a bitcoin exchange, as every exchange has its prices and features. Also, you are using your hard-earned money, so you must make sure you choose the right genuine and reliable platform. Some exchanges are centralized while some are decentralized, and the major difference between the both is privacy. You can choose the exchange according to your motive or what you want to accomplish. Along with it, you must check this Bitcoin trading platform to explore new bitcoin investing strategies.

How do bitcoin exchanges work?

Bitcoin exchanges act as intermediaries between buyer and seller that make them meet. Investors can buy bitcoin from bitcoin exchange using the digital wallet. Once a transaction is initiated, it is recorded in a blockchain ledger viewable to the public. Anyone can view the bitcoin transactions, but no one has the right to alter the information once written in the blockchain ledger. Sometimes, exchanges also transact on the user's behalf but never transfer bitcoin to an external wallet.

Because the legality status of bitcoin is not clear yet, people are confused about whether bitcoin exchanges are legal or not. Bitcoin exchanges are online marketplaces considered legal in specific countries across the world, like the United States. Storing and securing bitcoin is ultimately the responsibility of the investors, and investors are responsible for reporting the gains made with crypto investors to follow the law and complete annual tax filing. Now, some exchanges also offer wallets to store cryptocurrencies, so what are their other wallets?

What are the differences between bitcoin wallets and exchanges?

Bitcoin exchanges and bitcoin wallets are two different things. Exchanges are the places where you can buy and sell cryptocurrencies. Some exchanges also enable users to store their crypto investments in their wallets, but in reality, exchanges are not safe to store your investments. This is because exchanges are not built with the motive to store crypto coins but are developed to allow users to buy and sell crypto coins. But in case, if you choose a centralized exchange, the exchange will take control over your bitcoins and will hold them on your behalf.

Users can also choose to store their crypto investments in external digital wallets. These wallets are software that doesn't technically store your crypto coins as bitcoins are virtual coins. External digital wallets include hot wallets and cold wallets. Hot wallets are web wallets that can only be used with an internet connection, whereas cold wallets are offline wallets that work without an internet connection. As security is the main motive of investors and traders, everyone should store their crypto coins in cold storage wallets as they are more secure. If you want to trade bitcoin on a daily basis, you can store your coins in hot wallets as well.

List of Popular Crypto Exchanges

Binance

Bitcoin is a popular crypto exchange launched in 2017, especially for residents of the United States. This crypto exchange allows users to trade, buy and sell cryptocurrencies. It even provides users the chance to earn interest in their crypto investments by staking them. Users can buy crypto coins from Binance using debit/credit cards, bank transfers, and bank deposits according to their convenience.

Coinbase

Coinbase is the largest and highly popular exchange that has attracted more than 30 million users across the world. This crypto exchange was launched back in 2021 and is currently used in around 100 countries. Coinbase is best for new and inexperienced investors that are planning to step into the crypto world.

Kraken

Kraken is a crypto exchange that allows users to trade more than 50 cryptocurrencies. This is a US-based exchange that was launched back in 2011. It offers three packages to its users involving beginner, intermediate and advanced users.

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This is interesting!