Hi folks,
Hi guys! I want to understand cryptocurrencies, but I can’t figure out how a cryptocurrency exchange works. As far as I understand, you can buy and sell cryptocurrency on such platforms, but how exactly does the exchange happen? Why are some rates different on different exchanges, and who sets the price anyway? And all these commissions, limits — how do they work? Maybe someone can explain how cryptocurrencies are traded on the exchange, what is needed to get started, and how it differs from regular exchanges, for example, stock exchanges? It would be great if someone with experience shared!
2 comments
tbes50203
22 Nov 2024
Good question, it is really worth understanding how cryptocurrency exchanges work, because it is a key element of the crypto world. I will try to explain it in an accessible way. According to https://www.barchart.com/story/news/12880052/what-is-a-cryptocurrency-exchange-and-how-does-it-work, a cryptocurrency exchange is an online platform where people can exchange different cryptocurrencies among themselves or for fiat money (e.g. dollars, euros, rubles). Exchanges function as intermediaries that provide the user with the ability to buy and sell cryptocurrency, as well as keep it on the platform as a “deposit”. Some of these exchanges support only a few cryptocurrencies, others offer hundreds of different assets, including more exotic tokens. Centralized (e.g. Binance, Kraken, Coinbase). In these cases, all transactions go through the platform, which acts as an intermediary. It is important to note that your funds are stored on the exchange account, which creates risks if the exchange is found to be unreliable or hacked. Decentralized (e.g. Uniswap, PancakeSwap). In decentralized systems, users interact directly through smart contracts without the involvement of a central intermediary, which increases anonymity and reduces risks, but can also affect the liquidity and speed of transactions. On the exchange, the exchange occurs through orders. When you want to buy cryptocurrency, you create a buy order - for example, you want to buy Bitcoin at a price of $ 25,000. Other users of the exchange can create a sell order - for example, at a price of $ 25,100. If your price matches the sell price, the transaction is automatically executed. If not, the order remains in the system and can be "picked up" by other users when the price of Bitcoin reaches the specified price.
thiefcrazy98
22 Nov 2024
I'll add a few words. It's important to remember that exchanges are not only a place for trading, but also a potential source of income for those who decide to engage in trading or even arbitrage. For example, I sometimes use strategies based on trend and news analysis to catch moments on price fluctuations between exchanges. This can bring in a good profit, but there are risks, too.
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