Digital Currency: The Exchanges

Blockchain technology has been rapidly adopted to create digital currency. The velocity of digital coins being created in the marketplace has created an opportunity for digital currency exchanges (DCE's) to spring forth to facilitate trading of the coins. The current count of total digital coins is upwards of 2800, with new ones cropping up every week.

The digital currency exchanges are a hybrid of banks and traditional stock trading exchanges. The steps typically include: creation of a digital wallet, conversion of fiat or hard currency into digital currency, and trading them for other coins. You can also sell your digital coins and convert back to fiat currency.

Q: Which digital exchange to trade on?

Large exchanges such as Binance, Bitfinex, ShapeShift, Kraken, CoinBase, KuKukoin, Bitstamp, and Bittrex are popular with the general public. Upcoming exchanges such as LATOKEN offer additional value to customers by providing marketing & community building services. All in all, there are 200 odd digital currency exchanges,with some that are very small and floundering in the vast ocean.

Since there are several choices for trading, the road to being a well informed consumer is the best choice. Some factors to consider are:

• Security/Reputation – Check the history of the exchange. Ask questions of the community- online and offline. Get informed. CoinCheck and Mt Gox are historical hacks in the industry- security is very important.
• Fees – Most exchanges charge fees for purchase and trading of currency. These vary between exchanges and a little research will give you the best choice for your investment needs.
• Methods of payment – Check out how you can make a payment? Credit, debit, bank transfer, wire transfer etc. Not all exchanges are created equal when it comes payment options.
• Verification – There is typically a verification process by the exchange (with exceptions), so one has to be patient, as it may take a day or more. This step is done to weed out scammers from using the exchange.
• Geographical Restrictions – Some user functions may be restricted in your country. Ensure that you have access to the functionality you desire in your country of residence.
• Portfolio- Look into the coins listed on the exchange. Some are prolific while others list a mere handful. The currency pairs available are also a factor to look into. For example, bitcoin trades to fiat currency like USD, EURO or altcoins.
• Fiat conversion - Some exchanges do not support fiat to digital currency conversiom. You can trade only if you already have bitcoins. You will initially have to convert fiat to bitcoin at a separate exchange.
• Liquidity- The volume and frequency of trading are major factors determining the liquidity of any market. Higher liquidity is a desirable trait in any exchange. In the case of digital currency, liquidity translates into how easily a coin can be bought or sold for its exact worth, without applying discounts.

Summary: A little research will go a long way. Since digital currency is still vastly an unregulated and volatile market, you can temper any additional risk by being choosy about your exchange.

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