Why Cryptocurrency Exchanges Make Money

The past decades have seen intense digitalization of many processes which were normally conducted physically, in person. This trend is expected to continue for a decent amount of time, engulfing all of our physical work into the digital realm of computers and machines.

In that particular respect, another faction of our life that is soon expected to be engulfed by the digital and online realm is the concept of banking and money. The past decade has seen an exponential rise in the presence of virtual and cryptocurrencies on the global and virtual market.

This can be a credit to several features, such as an overall sense of safety or the reduction of physical engagement hours. After all, who would want to wait hours on end to deposit their money?

The solution to such predicaments was the conception of money that existed solely on the World Wide Web and can be redeemed for ‘actual’ money or purchase in the form of credit exchange. However, it is an interesting prospect if one considers how people can profit from this little readjustment. That is done via the consistent use of cryptocurrency exchanges, which serve as a hub for bringing like-minded people together.

What they do

A cryptocurrency exchange can perform several functions. However, the most notable one that they’re responsible for is the exchange of one cryptocurrency for another. The prices of the particular currency may change and fluctuate, as per the demand of the seller.

Normally, users are able to bargain a decent prize for currencies that are abundant in this industry. Several other factors may also account for the normal rates.
Cryptocurrency exchanges are of several different types and can cater to different type of audiences.

There are exchanges which solely facilitate traders, whereas there are other exchanges that are primarily users by vendors for currency exchanges and selling cryptocurrency. A good analogy to understand what most cryptocurrency exchanges do is by picturing parallelism with stock exchanges.

Just as people in stock exchange trade and sell stocks and assets, Cryptocurrency exchanges involve users selling and trading the currency that they have for a profit. However, the main difference is that the latter involves a very volatile market, which means not everyone can profit easily. The profit arises from the difference in pricing for different cryptocurrencies.

Services they render

Cryptocurrency exchanges provide a plethora of services. For people who are not familiar with the industry, the prospect of cryptocurrency exchanges is strictly alien and new to them. However, the basic premise of the cryptocurrency exchange industry is straightforward and draws several parallels to real life banking structures.

For starters, the main service that this industry renders is absolute safety. Users who participate and frequently indulge in cryptocurrency exchanges are guaranteed absolute safety and anonymity. As the name implies, cryptocurrency is the currency that undergoes strong cryptography in order to secure financial transactions. Hence, all transactions made of this regard are generally safe and reliable.

To facilitate and increase safety measures, cryptocurrencies also provide two different types of storage methods, which are referred to as ‘wallets.’ The two types of the wallet are called ‘cold wallet’ and ‘hot wallet.’ The latter is directly connected to the internet and linked with the exchange that the user users.

This is the ‘storage’ point of the user, where they may store their virtual currency. The ‘hot wallet’ is normally an external hard drive or USB which stores the user’s cryptocurrency, so that he/she may be safe from any hacking attempts, whatsoever.

As mentioned above, cryptocurrency exchanges are sort of alternatives for the regular banking industry. Hence, the second service that is provided is roughly an alternative for the latter. Cryptocurrency exchanges enable users to trade, sell, and hold cryptocurrencies which they can use for whatever purpose they want.

As mentioned above, there are several different types of cryptocurrency exchanges. As such, different exchanges cater to different audiences. The general crux of the matter is that users trade and sell their cryptocurrency in order to make a profit. However, the prices are normally decided by the seller and don’t generally conform to traditional prices or conversion rates.

Cryptocurrency exchanges also facilitate eager and enthusiastic users to socialize and network with people of similar interest. Basically, being a member of exchange will enable you to meet different sellers and buyers, who all basically have the same interest or belief in the same financial objective as you do.

This industry also offers the facility of centralized cryptocurrency exchanges. The main selling point that they have is that all transactions and ‘money’ handling are done by professionals who are trained in this regard. By putting faith in the third party’s hand, users are also guaranteed safety due to the high amount of cryptocurrency traffic that is involved.

How users pay exchanges

Users are generally well-versed in the use of cryptocurrency exchanges before they start out. Initially, users choose an exchange that they deem worthy, which has a good and modest reputation in the industry. Several factors can contribute to this, such as verification requirements, exchange rates, payment methods, and fees.

The user then signs up at the cryptocurrency exchange and registers an account for themselves. They will then connect their existing bank details via the method recommended by the exchange. Some sites ask for credit/debit cards. Once done, the user then converts their ‘actual’ currency into cryptocurrency.

The user may choose to invest in any currency that he/she may seem fit. Once done, the user may then further choose to sell/trade the cryptocurrency from one form to another. The price differences that occur via this are what result to profits.

Once a transaction is completed, the cryptocurrency exchanges the user is registered to is assigned a commission fee. This is the money that the ‘site’ makes. However, in order to make a good profit, the exchange needs to ensure a high amount of traffic so that plenty of trade occurs.