Let me give you some background on why I chose this subject for this post. My colleagues and I were discussing how authorities might try and control cryptocurrency trading. Our conclusion was that the only way to really hurt crypto was to target the exchanges. Exchanges play an important role in cryptocurrency in more way than one.
The first thing you need to get started with cryptocurrency is money (FIAT) and an exchange where you can buy coins. Whenever I want to buy cryptocurrency I use Litebit.eu or Anycoindirect.eu, primarily because they support iDEAL.
iDEAL is a Dutch payment service that allows online payments with your bank account
These exchanges are important because you can exchange FIAT (old fashioned digital money) into cryptocurrency (fast, often decentralized digital currency on next-gen blockchains).
If ever these types of exchanges or services were targeted it would be hard to buy cryptocurrency. The only way to get some would be through mining or sites like Steemit where you can earn coins.
When you have your coins (most likely Bitcoin or Ethereum) it is time to go to another type of exchange and buy some other coins that are dirt cheap and are most likely to become the next Bitcoin.
The way to do this is to register an account on a different kind of exchange, one that focuses on trading.
I have a number of accounts for trading Exchanges and they all have their own pros and cons. Visiting this kind of exchange can be quite overwhelming, when you first go to the exchange part of the site, you will be bombarded with graphs and sell/buy order info, different kinds of markets (ETH, BTC, USDT). On these exchanges you can trade your coins for other type of coins, you can sell or buy coins from other crypto traders.
I have no preference for a certain exchange but here is a list of some of the exchanges I use or have used:
Poloniex - The first Exchange I started on. The interface is very user friendly and I never had any problems but I moved away from Poloniex after there were some problems with Steem/SBD.
Bittrex - I probably use this Exchange the most at the moment. The user interface is somewhat less user friendly compared with Poloniex but it gets the job done and the exchange is pretty reliable (as far as Crypto Exchanges can be reliable).
HitBTC - On the one hand they support a great deal of coins but the site is far from reliable. Avoid this one if you can, especially the withdrawal/deposit issues are a big turn off.
Cryptopia - Ok -ish site but very sloooow.
There are a lot more Exchanges but I don’t have much experience with those. Kraken gets good reviews from what I’ve heard. I recently added Kucoin and Binance to my list of exchanges but haven’t done any trading there yet.
These kind of exchanges are important because this is where all the trading of coins takes place. Because of the international nature of these exchanges they are next to impossible to control. If one should go down, another one will take its place.
One thing that all these exchanges have in common is that they often have a problem coping with the growing user base which leads to networks issues and slow support response.
Like the previous Exchanges you can use these type of exchanges to trade coins. The difference is that here you don’t trade coins with other users (as far as I know) but directly with the exchange itself.
Examples of these kind of exchanges are Blocktrades, Shapeshift and Changelly. On the site you choose the currencies you want to exchange and sent crypto. The exchange will then forward the new coins to your wallet.
These exchanges have a more reliable vibe. I have been using Blocktrades (for obvious reasons) for some time now and found that is a reliable and easy way of transforming one coin into another (especially for Steem and SBD).
The downside is that the transaction fee can be quite high.
Look at it this way, you are paying extra for the ease-of-use. If you are a beginner to cryptocurrency, this kind of Exchange is the most newbie friendly way of exchanging crypto.
Another downside is that this kind of exchange only trades a limited amount and type of coin. So don’t expect to be able to trade new or uncommon coins.
These kind of exchanges are more vulnerable for outside influences because I reckon that they must have a large stock of crypto stowed away. This might pique the interest of IRS- like organizations.
So you’ve bought some Bitcoins, went to an exchange to trade and bought a promising coin. After the coin quadrupled in value you sold the coin for Bitcoin. Now it is time to get a payout and spend some of your earnings.
Here is where the last type of exchange comes in play.
Sites like Litebit and Anycoin direct let you sell mainstream crypto for money. The process is simple, just enter the amount of BTC/ETH you want to sell and you will see how much you will get (euros in this case). You will get an address where you can send your coins. Enter your Paypal or IBAN bank account and a couple of days later you will receive the payment on your Paypal or bank account.
A lot of my friends like this way of turning crypto into FIAT but to be honest I don’t prefer this method.
Another way of turning crypto into FIAT (and my favorite) is to use an exchange that also supports debit cards. My favorite sites are Payeer and Spectrocoin. On these sites you have different wallets (Dollar, Euro, BTC, ETH) and you are able to sell your cryptocurrency for your favorite FIAT currency. After you have received your digital FIAT currency you will be able to load your debit card and do some online purchases or hit the nearest ATM machine.
These kind of exchanges are getting some unwanted attention at the moment. Spectrocoin for example has lost its debit card because of mischief by the card issuer WaveCrest (Spectrocoin is busy with a new card as we speak) and Payeer has announced that it is blocking all cards issued to non-Europeans.
Exchanges that turn your cryptocurrency into money are most vulnerable because they rely on Banks or Services controlled by Banks. If Banks ever decide to crack down on cryptocurrency chances are it will be very hard to ever exchange crypto for FIAT.
If the “MAN” ever decides he wants to take down cryptocurrency then exchanges will certainly be targeted. If you can stop people from buying crypto with FIAT it will dissuade a lot of people. Even more important are the exchanges where you can trade crypto and the exchanges where you can cash in.
The cryptocurrency blockchains will still be operational but the motivation to invest in the altcoins will decrease dramatically.
This will all change of course when cryptocurrency will get a wider acceptance as a means of payment.
