How Do Cryptocurrency Exchanges Work?

What Is A Cryptocurrency Exchange? How To Start Trading In It?

For new investors, cryptocurrency is the buzzword. As much as it is promising in terms of giving returns over a short time, it is also volatile and risky. The whole idea of cryptocurrency is based on a distributed ledger that stores information on every transaction or trade. Also, the trade is protected by high-grade cryptography. The simplest way of investing in cryptocurrency is by trading (buying and selling) of any crypto coin like Bitcoin, Ethereum, Dogecoin, Cadence, etc. These are done through online exchanges where investors open an account and start the trade.

What Is A Cryptocurrency Exchange?

These platforms facilitate cryptocurrency trading in exchange for digital and fiat currencies. They act as an intermediary between a buyer and a seller and charge a commission or transaction fee. CoinDCX, CoinSwitch Kuber, and UnoCoin are some examples of online exchanges operating in India. An investor can also use an online exchange to convert their crypto coins back into fiat currency (Indian Rupee or US Dollar) for withdrawing the amount from their bank account later.

How Does It Work?

A cryptocurrency exchange acts like an intermediary – a brokerage firm – between a buyer and a seller of cryptocurrency. It allows a buyer to deposit money using several methods like direct bank transfer, UPI, using debit or credit cards, etc. It charges a set commission or fee for every transaction done using its services.

The first thing a buyer (or investor) will need to do is to find the right online exchange. This step will require a fair bit of research about the platform’s history, credibility, and what benefits it will offer you for trading. The next step is opening a trading account, which is fairly simple.

Download an app of the exchange you have selected and create an account. It will ask you for some information like your email address. It will then send a verification email to that address and may also ask for KYC details. Verify the address on your email id and complete the KYC process. Then set a password on the app and you are set to launch yourself in the world of cryptocurrency.

Do not lose any passwords related to the app, wallet, or exchange. They may not be recovered.