Cryptocurrency exchanges or digital currency exchanges (DCE) are businesses that allow customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money, or different digital currencies.[1][2] They can be market makers that typically take the bid/ask spreads as transaction commissions for their services or simply charge fees as a matching platform.
1.)“Traditional” Cryptocurrency Exchanges: These are the exchanges that are like the traditional stock exchanges where buyers and sellers trade based on the current market price of cryptocurrencies (with the exchange playing the middle-man). These type of trading platforms generally charge a fee for each transaction. Some of these types of exchanges deal only in cryptocurrency, others allow users to trade fiat currencies like the U.S. dollar for cryptocurrencies like Bitcoin. Coinbase’s GDAX is an example of this type of exchange, as is Kraken. Of exchanges, there are those run by third parties (they have a middle man who can do support and correct some problems) and decentralized exchanges and peer-to-peer exchanges (exchanges without a middle man). EtherDelta is an example of this type of peer-to-peer exchange.
2.)Cryptocurrency Brokers: These are website-based exchanges that are like the currency exchange at an airport. They allow customers to buy and sell cryptocurrencies at a price set by the broker (generally at the market price plus a small premium). Coinbase is an example of this type of exchange. Shapeshift provides a similar service as well (it lets you swap on type of token for another). This is the simplest solution for new users, since it is simple and easy, you’ll pay slightly higher prices than you do on the exchanges.
3.)Direct Trading Platforms: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform like GDAX does. Direct trading platforms of this type don’t use a fixed market price. Sellers set their own exchange rate and buyers either find sellers via the platform and preform an Over the Counter (OTC) Exchange, or they denote the rates they are willing to buy for and the platform matches buyers and sellers. This solution is hardly ever the best one, but it can be the only solution in some regions. In regions where trading is limited to direct trading, make sure to do some research and ensure you are using a trusted platform and dealing with highly rated users. Also, make sure to check market prices on Coinmarketcap, you aren’t buying / selling at a fixed market price!
4.)Cryptocurrency Funds: Funds are pools of professionally managed cryptocurrency assets which allows public buy and hold cryptocurrency via the fund. One such fund is GBTC. Using a fund you can invest in cryptocurrency without having to purchase or store it directly.
