Users who are interested in acquiring bitcoins can do so through a bitcoin exchange. These websites enable customers to trade their traditional currency, like the United States dollar or the euro, for bitcoins. Individuals who use bitcoin exchanges will be made aware of the current exchange rate at the time of their purchase.
How Do Bitcoin Exchanges Work?
Bitcoin exchange visitors interested in acquiring bitcoins can do so by exchanging their more traditional currency. Similarly, individuals who wish to trade in their bitcoins can do so and receive the cryptocurrency’s current value. The value of bitcoin at the time of the trading is determined by the price indices, which are updated in real time.
The actual acquisition of bitcoins on these exchanges often operates in a similar fashion to the stock market. Users who are interested in acquiring bitcoins can post a bid price, the price at which they are willing to purchase bitcoins on the market. Similarly, those selling their bitcoins on these exchanges can do so by posting offer prices.
Current Bitcoin Exchanges
There are currently over 70 bitcoin exchanges that users can access over the web. Below is a breakdown of five of the most prominent exchanges users can access online.
Coinbase: The foremost bitcoin exchange in the world, Coinbase, operating in fourteen countries, offers individuals the opportunity to purchase and sell their bitcoins online. Although the company is currently expanding its services across Europe and now offers individuals from fourteen countries the opportunity to exchange their traditional currency for bitcoins, Coinbase is best known for the services it offers to United States customers.
The website’s services have been simplified so Coinbase users can easily exchange their bitcoins or traditional currency safely online. First, users sign up for the website’s services and register their bank account on the website, enabling simple transfers of funds between the account and the website. From there, individuals can begin to purchase and sell their bitcoins on the website.
Additionally, Coinbase users can also store their bitcoins on the website and utilize its “wallet” applications for easy usage of the currency outside of the exchange. With the web wallet, bitcoin holders can use their currency to purchase items online at websites like Amazon and Overstock. Similarly, mobile wallet users can use their bitcoins at “brick and mortar” stores.
Cryptsy: Based in Florida, this website offers users the opportunity to exchange their traditional currencies, like the United States dollar, for a range of different cryptocurrencies. Not only can users purchase and sell the very-popular bitcoin currency at Cryptsy, but they can also exchange for digital currencies like Dogecoin, LiteCoin, Peercoin, DarkCoin, FeatherCoin, Nxt, and ReddCoin. In total, users can complete exchanges in 198 different BTC markets in addition to 68 LTC markets. Over 150 different currencies are supported by Cryptsy.
Bter: This website offers users the opportunity to exchange their United States dollars, Chinese yen, bitcoins, and dogecoins for a variety of other currencies. Bter features safe SSL connections, low trading and withdrawal fees, and attentive customer service representatives. Additionally, users can download wallet applications for both their desktop and their Android phones for the easy usage of currencies outside of the bitcoin exchange.
BTC-e: This website, which began trading in 2011, offers users the opportunity to exchange their bitcoins, United States dollars, and euros online. Previously, the website had also included the ability for visitors to exchange their Russian roubles. However, the website has since discontinued this functionality due to the nation’s hard stance against cryptocurrencies. BTC-e users can also make exchanges for Litecoins, Namecoins, and other cryptocurrencies.
Kraken: This bitcoin exchange website offers visitors the opportunity to exchange their United States dollars and euros in exchange for Bitcoin, Dogecoin, Namecoin, Litecoin, and Ripple. Kraken, an exchange which is based in Europe, also places a large emphasis on the website’s security and does not charge a large number of fees.
Bitstamp: This United Kingdom-based bitcoin exchange is the second largest in the world, with a 30-day trading volume of 352,288.814 BTC and $152,620,330.69 US dollars. Despite being said in the UK, the website only facilitates the exchange of bitcoins for US dollars. However, users can deposit the funds traded for on Bitstamp through the European Union’s Single Euro Payments Area. The exchange recently incorporated stop order and trailing stop order features to help users better control their trading.
Mt. Gox: The Exchange That Used To Be #1
While the bitcoin exchanges discussed above has since become the leaders in the field, over 70% of all bitcoins were once exchanged on Mt. Gox. This website, which originally began as the “Magic The Gathering Online eXchange”, offer users a platform to purchase and sell their bitcoins online in 2010, when a Bitcoin advocate determined that bitcoin users needed a central site, like a bank, to exchange their bitcoins safely.
Mt. Gox’s downfall came as a result of the website’s inability to provide security to its user base. Over 850,000 bitcoins disappeared from the exchange website. The total value of the lost bitcoins at the time was over $450 million US dollars. Over 200,000 exchanges have since been found, with the reasons for the disappearance of the bitcoins include theft, fraud, and general mismanagement. In February 2014, the website ceased its operations and the story of Mt. Gox’s failure has led to an increased emphasis on security by emerging exchanges like Kraken.