Cryptocurrencies have been the talk of the financial town for quite some time now. When Satoshi Nakamoto released the white paper to the blockchain-based Bitcoin, a brand new industry of digital tender was born. When it comes to money – in any form – two of the questions immediately raised are “how can I get it? and “where can I spend it?”
There are two answers to each of those questions:
How can I get cryptocurrency?
The short answer is that you could mine it – if it is mineable like Bitcoin – or you could buy it from a cryptocurrency exchange.
Where can I spend cryptocurrency?
You can use your cryptocurrency tokens to purchase from service and product providers who accept the digital currency. You can also “spend” your tokens at a cryptocurrency exchange to trade it for local fiat currency or to change it to another token. For example, you could trade your Bitcoin for Ethereum at an exchange which offers both currencies.
The common answer to both of these questions relates to the function of a crypto exchange.
What is a cryptocurrency exchange?
A cryptocurrency exchange is similar to a stock exchange, but with a focus on cryptocurrency tokens rather than stock trades. Essentially, a crypto exchange offers a platform whereby customers looking to buy and sell cryptocurrency assets can exchange the digital tokens in values based on current market prices.
Usually, exchange platforms allow transactions or trades to take place in forms such as:
- Local fiat-to-cryptocurrency transactions, and
- Cryptocurrency-to-cryptocurrency transactions.
Some cryptocurrency exchanges offer a platform which is focused on ease for the customer, some hope to offer competitive pricing and others want to provide a platform which professional cryptocurrency traders can use.