There are several ways you can buy cryptocurrency: directly from person to person, through ATMs, brokerages like Robinhood Markets, via PayPal, or by using a dedicated crypto exchange. There are pros and cons to all methods, and ultimately it comes down to a personal choice, but using a crypto exchange is by far the most popular.
What is a crypto exchange and how does it make money?
A crypto exchange is an intermediary, like a broker, connecting buyers with sellers. Instead of you scouring the internet looking for someone to buy your Bitcoin, or for someone else to sell you Ether, a crypto exchange does all that hard work for you. You just simply tell them what you want to buy, how much you want to buy, and how much you're willing to spend. Then they will match you up with a seller willing to meet your demands. For doing this work on your behalf they will take a small fee, usually as a percentage of the sale, which is how exchanges make their money. You can buy crypto with fiat money, exchange crypto for fiat, and depending on which coins an exchange offers, you can also trade crypto for crypto. Much like a brokerage, there are two methods an exchange offers users to buy and sell crypto.
You can either use a market order or a limit order. A market order matches buyers (takers) and sellers (makers) at the current price of the specific coin in question. A limit order matches makers and takers at a specified price, for example, the current price of Bitcoin is £23,950.00, but you want to sell when the price hits £25,000.00.
Advantages
The main benefit of an exchange is convenience. It takes all the stress out of the process, so you can just sit back and watch the crypto roll in. To register with an exchange is simple enough, and part of the process is a KYC check - Know Your Customer. An identity check is done using a driver's license or passport. That means everyone you are trading with has been vetted which offers (read more: https://www.coinpass.com/en/blog/markets/what-is-a-crypto-exchange-and-why-is-it-needed)…
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