What is a Cryptocurrency Exchange?

A cryptocurrency exchange is a platform for trading online where one can exchange a cryptocurrency with another type of cryptocurrency. A cryptocurrency exchange is like a stock or a currency exchange. Cryptocurrencies are being heralded as the future currency in the age of information and technology. What is a cryptocurrency exchange platform can be explained by imagining it like a terminal where one is able to trade different types of cryptocurrencies. There are four types of cryptocurrency exchanges in common practice. They are the conventional cryptocurrency exchange, which is like a stock exchange, then there are cryptocurrency brokers who operate via web-based exchanges and they can be compared to the foreign currency exchanges at airports. Thirdly, there are direct cryptocurrency trading platforms who offer peer to peer trade between the sellers and buyers of cryptocurrency. The final type of cryptocurrency exchange is cryptocurrency funds which are a pool of cryptocurrency assets where the public can buy and invest in cryptocurrency without having to store it directly or purchase it.

The first cryptocurrency to be launched in the cryptocurrency market was the Bitcoin. The global cryptocurrency industry was estimated to be above $700 billion at the start of 2018 according to a journal published by the CNBC website. The growth of the cryptocurrency market has been forecasted to expand at a CAGR of more than 31% for the next five years due to the entry of new cryptocurrency exchanges at a rapid pace across the globe. There are already more 1,200 types of cryptocurrencies in the world, and all of them can be purchased with a Bitcoin. However, the cryptocurrency market is regulated very lightly and there are no stringent norms that are being followed in this industry so far which leaves a high scope of the risk of mining cryptocurrency. If you still have the question about what is a cryptocurrency exchange, then the below paragraphs will help you understand better about this topic.

Understanding What is a Cryptocurrency Exchange

In simple words, what is a cryptocurrency exchange can be explained by understanding that a cryptocurrency is a virtual form of money which is not controlled by any central authority or a bank. It can be traded freely on various types of cryptocurrency exchanges and the transmission of the currency cannot be regulated or disrupted by any third-party institution. A buyer can sell cryptocurrency to any person across the world electronically. A cryptocurrency wallet is an essential component to store the cryptocurrency.

There are five types of cryptocurrency wallets in existence right now and they are listed below:

• Paper Wallet: Paper wallets were the first wallets introduced for cold storing cryptocurrency. These types of cryptocurrency wallets are the most secure and have zero risks from cyber-attacks and threats as no data must be stored on any server or computer.

• Web Wallet: Web wallets, also known as the online wallet can be accessed via a web browser and they are the fastest in terms of speed of the transaction and are ideally suitable for small amounts of cryptocurrency storage. However, these types of cryptocurrency wallets are very prone to security thefts from hackers.

• Mobile Wallet: These wallets for storing cryptocurrency can be installed on a personal mobile device and are very handy to manage the account and make cryptocurrency transactions on the go. But the risks of malware on mobile phones, especially on the Android platform is the biggest disadvantage for mobile wallets.

• Desktop Wallet: As the name suggests, desktop wallets are meant for cold storage of cryptocurrencies on a PC or a laptop. These are more secure than mobile and web wallets and is very safe if it not connected to the internet as it eliminates the threats of cyber-attacks.

• Hardware Wallet: Hardware wallets are the least user-friendly type of cryptocurrency wallets but are considered much more secure than Web, Mobile, and Desktop wallets. They resemble a USB storage device and are ideal for cold storing large quantities of cryptocurrency.

Here is the list of the top 10 cryptocurrencies in the world as per an article of the Express UK, a part of Daily Express.

Globally, cryptocurrency has brought about a revolution for transactions done digitally. A cryptocurrency exchange practices a clearly decentralized monetary system with the help of blockchain technology. Europe is the largest market for most types of cryptocurrency exchanges. Germany is projected to dominate the market for hosting the best cryptocurrency exchange. Bitcoin holds the largest share of market capitalization across the globe. Bitcoin, Ethereum, and Ripple are the best cryptocurrency to buy now. North America region is the second largest market for cryptocurrency and has witnessed a rapid growth for the past three years. Between 2017 and 2018, the market capitalization of all the cryptocurrencies across the world grew by 4000% and the year 2017 has been called the year of cryptocurrency. The Asia Pacific is also expected to grow significantly over the next few years as countries like China, Japan, and Singapore are increasingly adopting virtual currencies. The Middle East and Africa market are likely to grow owing to vast opportunities for in UAE, Saudi Arabia, and South Africa. What is a cryptocurrency exchange capable of in the near future is unimaginable if most of the economies accept cryptocurrency as a legitimate currency?

The global cryptocurrency market has the presence of international players like Microsoft, Intel Corporation, and Nvidia for the technological support for the cryptocurrency exchange platforms. The growth of various types of cryptocurrency exchanges is also driven by an innovative feature of blockchain technology called the smart contract. A smart contract can execute commercial agreements and transactions automatically. This ensures all the obligations of the concerned parties in an agreement are fulfilled and eliminates the expenses of a middleman or a broker. The cryptocurrency market is forecasted to grow exponentially over the next five years at a three-digit CAGR and Bitcoin is expected to be the dominant cryptocurrency with a market share of 20-30% globally.

Best Cryptocurrency Exchange

What Will be the Future of Cryptocurrency?

Cryptocurrency was first launched by Bitcoin in 2009, and after that thousands of cryptocurrencies have emerged in the market today. Cryptocurrencies are a decentralized form of digital currency and that makes them free from interference or manipulation by regulating authorities. Bitcoins and other cryptocurrencies are digitally created with the help of a mining system that uses powerful supercomputers to simplify complex numbers and algorithms. Presently, around 25 Bitcoins are created every 10 minutes and they are capped at 21 million Bitcoins which is expected to be utilized by the end of 2140. These characteristics make the cryptocurrency unique and different from the fiat currency which is controlled and backed by the national banks in every country. Fiat currencies are completely centralized and there is no limit over the issuance of the fiat currency which makes it difficult to predict the future value of the said currency.

However, cybersecurity is the biggest threat to all types of cryptocurrency exchanges as it is decentralized, and transactions can be anonymous, many people can misuse it for illegal reasons and money laundering. Also, in the event of a computer crash, the entire data about the digital currency can be wiped out instantly or even a hacker can steal the encrypted data. But, rapid technological advancements in the cryptocurrency market are likely to overcome these challenges in the next few years. The number of retail merchants who accept cryptocurrency as a valid transaction has increased steadily over the years, yet they still form a minority on a global scale. Additionally, for widespread adoption of cryptocurrencies, first and foremost this form of digital currency needs to gain acceptance among consumers especially for the complexity it brings about for people who not adept at technology. A cryptocurrency which can become accepted as legal tender in mainstream finance will be required to fulfill wide and divergent criteria. The success of the top cryptocurrencies at dealing with these hurdles will determine the future of the cryptocurrency in the future. We hope that your understanding of what is a cryptocurrency exchange is now better. Do leave us your thoughts on this topic.

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