One of the most interesting things about the cryptocurrency world is how difficult it can be to buy your first coins, but just how easy it is to switch between those coins. Bitcoin for Litecoin, Ethereum for Ripple, or Dogecoin for the latest crypto invention; it’s pretty easy. That’s thanks in a huge part to cryptocurrency exchanges, or Bitcoin exchanges.
What are Bitcoin exchanges?
The term Bitcoin exchange has quite a bit of confusion around it. The Bitcoin part is pretty obvious, but what exactly is an exchange — what’s getting exchanged?
While a Bitcoin exchange could technically be a service where you trade your fiat currency — meaning government issued currency — for Bitcoin, most people use the term Bitcoin exchange to refer to services that let you trade your Bitcoin for other cryptocurrencies, or altcoins.
Many exchanges don’t limit you to just trading Bitcoin; they often have trading pairs with Litecoin and Ethereum too, among whatever other currencies they choose, which is why the term cryptocurrency exchange is equally popular. It really just comes down to the exchange.
How do Bitcoin exchanges work?
With most Bitcoin exchanges, the functioning is simple. You credit your account with a cryptocurrency of choice, you exchange it for another, and then, if you want to, you withdraw that.
Some exchanges might fulfill the trades themselves, accepting your coins slightly below market price and selling them on later to create a profit margin. Other exchanges might put your trades on an open marketplace, to be fulfilled directly by other users, with a small fee collected along the way.
Almost all Bitcoin exchanges will take your cryptocurrency first before sending anything back, using their reputation as a guarantee. And in fact, when they complete their half of the deal, they don’t actually send the coins — they just credit the number on your account. The real transaction on the cryptocurrency network only happens when you withdraw from the exchange.
How to use Bitcoin exchanges
Using a Bitcoin exchange is just as easy as you could hope for. Nevertheless, we’ve broken down the process into a few simple steps. Take a look:
1. Pick an exchange (see the next section for some suggestions).
2. Create an account as with any online service. Start with the “Sign Up” or equivalent button and follow the steps.
3. Credit your account. For this, use your cryptocurrency wallet to send a balance to the address the exchange provides.
4. Pick your trading pair and exchange!
5. Withdraw your new cryptocurrency.
The steps are pretty universal, because, despite each service being slightly different, they all work in mostly the same way.
Note: some Bitcoin exchanges might also require you to verify your account before starting or before trading large amounts of money. This is pretty routine stuff, and normally only includes proof of address and proof of identity.
Bitcoin exchange list
If you’re feeling ready to put your newfound Bitcoin exchange knowledge to the test, then you’re in luck. We’ve compiled a list of four of our favorite Bitcoin exchanges, which are, in no particular order:
And because each of these services are slightly different, we’ve compiled a table with some of their more important attributes to help you pick:
|GDAX||Cryptocurrency exchange also selling for fiat (USD, EUR, GBP)||Network fee + exchange rate||USD, EUR, GBP and BTC/ETH/LTC||Basic information plus photo ID required to sign up|
|Bittrex||Cryptocurrency exchange with a focus on security||Network fee + exchange rate||190+ cryptos||Basic information required plus ID and photos to lift limits|
|Poloniex||Highly technical exchange for profit trading||Network fee + exchange rate||Dozens of cryptos (no exact)||Basic information required plus ID and photos to lift limits|
|Kraken||Cryptocurrency exchange also selling for fiat (USD, EUR)||Network fee + exchange rate||USD, EUR or 20-ish cryptos||Basic information required plus ID and photos to lift limits|
|Shapeshift.io||Instant exchange service for small transactions||Network fee + slightly higher exchange rate||36 cryptos||None!