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What is a cryptocurrency exchange?

Which cryptocurrency exchange should I use?

Choosing the right cryptocurrency exchange can be the difference between a good investing experience and a bad one

A cryptocurrency exchange is an online platform where you can buy, trade, and sell cryptocurrency. However, different cryptocurrency exchanges can serve multiple different purposes, and depending on the person, an exchange might be needed for very different reasons. The right exchange for me might not be the right exchange for you.

When you begin to shortlist exchanges in your search for the perfect suitor, it’s important to consider your unique set of needs and preferences. You can think of it like searching for a life partner. OK, maybe that’s a little bit too far, but nonetheless, choosing the right exchange will make your cryptocurrency life a lot easier and happier. 

Exchanges have many similarities, but it is their subtle nuances that set them apart and give you different options. Choosing the right exchange is about paying attention to these differences and selecting the best match with your goals and background.

Different cryptocurrency exchanges for different purposes

Don’t have any cryptocurrency? Use a trusty fiat-to-cryptocurrency exchange and buy some first. Looking to invest in a relatively unknown altcoin? Search out the coin’s availability and use a cryptocurrency-to-cryptocurrency exchange where it’s listed. 

As you can see, there are many different scenarios when investing in cryptocurrency, and these are only scratching the surface. In an attempt to cover as many bases as possible, I’ll outline a few of the most distinct differences and unique features among exchanges. Following the comparisons will be some exchange examples. I don’t endorse any of these exchanges, but I’m providing them to give you an idea of what’s out there.

As always, do your own research and choose what makes sense. When you’re reading the exchange trait descriptions, make a note of what is most attractive to you. It may be a bit different from what others are looking for, but that’s what sets us off on unique cryptocurrency investing journeys.  

Cryptocurrency exchanges – centralised vs. decentralised

In general, you should choose a centralised exchange if you value cost and convenience. Because centralised exchanges are able to aggregate many orders at once, they are able to operate more efficiently and offer better exchange rates to their users. On the other hand, a decentralised exchange aligns more closely with the vision of Bitcoin and other cryptocurrencies, eliminates middlemen, and gives users more control and a greater sense of security over their holdings.

Centralised:  Binance, Coinbase, Gemini, Kraken, Kucoin, Bitfinex

Decentralised:  IDEX, Waves Dex, OpenLedger Dex, CryptoBridge Dex, OasisDex, Radar Relay

Low fee vs. high fee

The benefit of a low fee exchange should be pretty obvious. As the name suggests, low fee exchanges offer reduced exchange rates and let you keep more of your money. No exchange will blatantly say that it’s “high fee,” but there are certainly some exchanges that take a larger cut of your pie.

With these high fees usually comes increased convenience however, so there is a bit of a trade-off. If you value ease of transactions, high fees might be justifiable. At the same time, you might be able to find a comparable, if not better, exchange experience with much lower fees, so take a look around at alternatives before committing to an exchange with an exorbitant fee structure.

Low fee:  COBINHOOD, GDAX, Binance, CEX.io, Bitpanda, Bitfinex

High fee (but with added convenience):  Coinbase

F2C (Fiat-to-Cryptocurrency) vs. C2C (Cryptocurrency-to-Cryptocurrency) 

F2C exchanges allow you to exchange fiat currencies (USD, GBP, EUR, JPY, etc.) with cryptocurrency (usually Bitcoin and Ethereum). A C2C exchange, on the other hand, allows for conversion between different cryptocurrencies, and these options are usually represented by trading pairs with BTC, ETH, or another popular cryptocurrency.

This definition can be a little bit confusing, however, because an exchange can technically be both an F2C exchange and a C2C exchange. For example, Kraken offers an ETH/USD trading pair along with an EOS/ETH trading pair. This is just one example, but it is becoming more common to see a combination of F2C and C2C offerings as cryptocurrency popularity increases.

F2C: Kraken, Coinbase, Gemini, Bitstamp, Coinmama

C2C: Kraken, Binance, Kucoin, Gate.io, Bibox

 

Check out our other cryptocurrency guides here.

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