The world of cryptocurrency exchange is a dynamic and constantly changing environment. This is because we are in the middle of a financial revolution that is currently happening today as we speak. Back in the day, people would trade crops for spices or other things that cannot be found on their side of the plain, this resulted in the barter economy or trading one good for another. Fast forward a few thousand years later, money was invented to replace barter trade and create a different trading medium. Of course currency is not global and different countries have their own currency to circulate within the country. International trade was obviously hard before the Foreign Exchange Market was invented. In the world that we live in today, we are integrating crypto as a new decentralized monetary medium that is taking everyone by storm. Naturally, exchange websites exist to not only cater to Fiat-Crypto trade but Crypto to Crypto trade as well. In this article, we will be talking about how cryptocurrency exchange started, how it is today, and what will it become a few years from now.
A Short History
Cryptocurrency and its various exchanges didn’t just come out of a cereal box. Crypto was introduced around a decade ago and not until five years later (around 2013) did it start to be relevant.
Back in 2010, a programmer named Laszlo Hanyecz traded 10,000 BTC for two pizzas. People at that time didn’t even know what he was doing and even laughed at the thought of exchanging “mere computer codes” for food. Little did he know that this was the first step or the “barter trade” era of Bitcoin & cryptocurrency which would eventually evolve into a thriving market today.
There have been a lot of exchange websites that have catered to crypto trade, but there are only a few websites left from the pioneering era of bitcoin. The ”Older” websites died because of the evolution of the crypto exchange trade. If you think about it that way, Darwin’s theory of evolution fits perfectly where natural selection plays part and weeds out the weak platforms and we are left with effective, advanced and legally compliant exchange websites.
Way back in 2010, the first BTC exchange was established by a Bitcointalk user but just dwindled into non-existence after they had an issue with PayPal. The failed attempt at creating a solid exchange market was taken up by MtGox.com and we all know how it all ended. For you guys that have no idea about what happened with the website, they were the biggest exchange market for Bitcoin but the site had an implosion due to the massive BTC theft that happened in 2014. Ask anyone that is into the Bitcoin exchange world and they will tell you how MtGox fell from grace and brought about a bear market for around a year or so.
Exchange websites have different ways of storing their crypto funds, and they way they stored their funds has evolved over the years. Crypto is usually stored in Hot and Cold wallets and both have different uses. Hot wallets are wallets that are used to provide for the daily liquidity needs of customers, thus making them vulnerable to attacks since they are stored online. On the other hand, we’ve got cold storage that is kept offline making it more secure compared to its counterpart. Since the MtGox issue, you have some exchange websites that have been telling people that they store more than 90% of their funds in cold wallets to ensure the safety of their customer funds.
The exchange websites eventually moved outside the realm of BTC and integrated other emerging alt-coins like Ethereum, Monero, Doge, and Litecoin into their exchanges. By doing this, the crypto exchanges helped spread cryptocurrency and encourage the growth of other crypto markets.
Most importantly, exchange websites have become more vigilant in terms of security. There are noticeably more exchange websites today that pro-actively include Two-Factor Authentication in their registration process to make sure that their customers accounts are secured and well-protected.
Exchange Websites Today
There might be a lot of exchange websites today but there are a few websites that you might want to check out if you want to get your feet wet. To name a few we’ve got Coinbase, BitMEX.com, Binance.com, Bitfinex.com, Huobi.pro and OKCoin.com. This short list might not include any of your favorites but they do their jobs pretty well. These websites have good liquidity, offer leverage for trading and offer Futures, Derivatives, and Margin Trading too.
Exchange websites did not only evolve to be straightforward currency trading websites, they also have become trading platforms for fiat & tokens against cryptocurrency. If you’re looking into creating an exchange account with any of the available websites today, here are a few aspects that you might want to consider.
- Unregulated or Regulated - There are crypto exchange websites that are being regulated by a form of body or government that oversee trades or financial regulations. On the other hand we’ve got the unregulated websites. Unregulated exchange websites are there for one purpose only and that is anonymity. People, believe it or not, would sacrifice trading on a regulated website for something that can hide their identity. If you either want a regulated or unregulated one, you need to confirm this by reading their FAQ’s or contacting support.
- Fees - This can be Deposit, Withdrawal, or Trading Fees. Please be advised that there are websites that accept a variety of traditional payment methods, there are also some that only accept crypto for all the fees. Some exchanges might even have free deposit and withdrawals; and there are also a few that do not charge any trading fees.
- Deposit & Withdrawal Options - You need to make sure to check their deposit and withdrawal options since this will be your medium of getting your funds in and out of the website.
- Coins or Token Available – As mentioned earlier, the evolution of exchange websites have been significant over the years. But there are still a few websites today that only provide support for Bitcoin trading but if you need a bigger variety of markets to trade crypto make sure you check out the selection of coins or tokens beforehand too.
- Mobile Friendly – This might not be important for some, but there are a some people that would like a website that can also cater mobile traders. Some of the top websites today have this feature but due to platform & security issues, not everyone has this feature.
- Restrictions – There is a lot to be considered when it comes to an exchange’s restrictions so it is best to read through the terms and conditions. The most common issue when it comes to restrictions would be countries that are excluded from their services. For example, there are a number of exchange websites that do not accept US residents due to laws that prohibit or limit US citizens from trading in crypto. Before creating an account, make sure that your country does not have any issues with the exchange to avoid any problems in the future.
- Customer Service – Last but not the least, people should always look into the customer service capabilities of an exchange that they are planning to use. This is to make sure that you will always have a connection with the people running the exchange in case something happens. The last thing you want to happen is to deposit some money and finding out a few days later that the website doesn’t even have email support to help you out. To find the best exchanges, it is good to check out Bitcointalk, Reddit and other forums for cryptocurrency discoussion and read about how the website you are interested in treats their customers.
- Account Creation - Depending on the website that you have chosen, the account creation process can be easy or hard. This means that sometimes websites would just only ask for an active email and you’re good to go. Some go as far as asking for documents such as your passport or bank statementto verify your physical address.
- Centralized or Decentralized - most traditional exchanges are centralized, meaning everything is controlled by one entity which leads to a single point of failure. To combat this, a recent trend is the decentralization of exchanges. It might be worth looking at some decentralized exchanges like Etherdelta.com and RadarRelay but the learning curve can be a bit higher than that of centralized exchanges.
People should also keep in mind the availability of Peer to Peer (P2P) websites that offer exchange services. The difference between P2P websites to regular ones is the fact that you will be able to conduct trade of crypto face to face with a person from your area. What’s great about this is that the market is given a face and not just something that purely happens online. This gives validation that cryptocurrency is a real thing and not just something that people on the internet thought of creating. If you are interested in P2P Bitcoin Exchange websites then make sure you read about LocalBitcoins.com since they accept all imaginable payment methods and support P2P exchange.
Despite the volatility that cryptocurrencies bring, there’s a big chance that a few years from now we will see crypto as an alternative payment medium over Fiat currencies. The world of crypto is exciting and rewarding if you know where to trade and how to make profit out of it. The market might not look stable as it is today, but it is surely more stable than the market we had a few years back. There is also a trend towards decentralized exchanges like Idex.market, Etherdelta.com and RadarRelay since they solve a lot of issues of centralized exchanges but also have some issues of their own.
Time will tell whether centralized or decentralized exchanges will prevail so it is good to keep your options open.
Before heading straight to your first exchange website, make sure that you have read about exchange tips and tricks to get the most out of your investment. The ico-check team wishes you good luck on your foray into exchanges!