What is a Crypto Exchange?

A crypto exchange is a platform where you can buy, sell and trade cryptocurrencies. Learn more.

Crypto exchanges are websites where you can trade cryptocurrencies for other cryptocurrencies or national currencies like USD. They’re the places where you actually buy and sell your crypto, so they’re a critical component of the entire system.

Crypto exchanges have been around since 2011, when Mt. Gox was first launched by Jed McCaleb as a way to trade Magic: The Gathering cards between people over the internet. McCaleb later turned his site into an exchange for buying and selling bitcoins before eventually leaving that project behind to start Stellar. Within five years of its founding, Mt. Gox had become the world’s largest bitcoin exchange by volume—but it also attracted hackers who stole $460 million worth of bitcoin from users’ accounts in 2014 before shutting down entirely two years later due to regulatory issues with Japanese banks.”

Since then, the crypto market has matured significantly and hundreds of cryptocurrency exchanges have been established. This guide breaks down the ins and outs of what a crypto exchange is.

What is a crypto exchange? 

A crypto exchange is an online website or platform where you can buy, sell and trade cryptocurrencies. You can also use your credit card to purchase cryptocurrency on an exchange. Digital currencies are stored in “wallets” that have public addresses (this is like the bank routing and account numbers) and private keys (this is like the PIN that lets you access your money). The wallet address of a person holding crypto will be visible to others, but there’s no way to know who owns it unless they tell someone else.

Crypto exchanges provide convenience, liquidity and security for users who want to trade coins between themselves or with other people around the world. They also provide services such as advanced cryptocurrency trading tools and access to historical pricing data so that investors can analyze trends across multiple exchanges at once.

Learn: How to buy crypto in Australia

How to use a crypto exchange

There are several ways you can use a digital currency exchange. The first step is to set up an account with the exchange. Each exchange has its own requirements for setting up an account and verifying your identity, so make sure to go through their process carefully before getting started. Once you’ve set up your account, you’ll need to deposit funds into by sending them from another wallet or your bank account (if they accept fiat currency).

Once they arrive in your new trading wallet, you’ll be able to buy or sell cryptocurrencies at any time by logging into the site and selecting what type of order you want to place.

How do crypto exchanges make money? 

As you’ve probably noticed, crypto exchanges don’t charge fees on every single transaction. They only charge trading fees when you buy or sell cryptocurrency.

For example, if you have $1,000 and want to buy 1 ETH (Ethereum) token on Swyftx (a popular Australian-based exchange), they will take 0.6% of your total purchase as a fee. That’s around $6 in this example.

Related: Comprehensive Swyftx review

In addition to charging transaction fees for buying and selling cryptocurrencies on their platforms, some exchanges also charge withdrawal fees from the funds involved in these transactions – especially if those funds are being transferred out of the exchange into an external wallet or bank account.

Types of crypto exchanges 

There are three types of crypto exchanges:

  • Centralized exchanges: These are the most common and popular form of exchange. This type of exchange has a central server that handles all the transactions, meaning that it needs to be trusted with your funds and personal data.
  • Decentralized exchanges: These don’t have any central servers, so they’re not controlled by one company or group of people. This makes them inherently less vulnerable than centralized exchanges—but also slower since each transaction needs to be recorded on every computer on a blockchain network.
  • Hybrid Exchanges: Hybrid platforms combine features from centralized and decentralized trading platforms in order to provide enhanced security while maintaining faster speeds than purely decentralized apps (DApps).

How to start trading cryptocurrency

There are several Australian-based and global crypto exchanges where you can easily sign up and start trading crypto. Read our best Australian crypto exchanges guide to find a trading platform that aligns with your needs.

Best overall exchange

Join Swyftx

Best beginner exchange

Join Coinspot

Best OTC exchange

Join Digital Surge