A crypto exchange is where the entire story begins. It is the entry and exit point for all users, old and new. However, due diligence is necessary before one selects the crypto exchange.
So what is a Crypto Exchange?
It is an online platform where you can sell, buy and trade cryptocurrencies. Some will allow you to trade using fiat currencies like the USD, and others allow trading only through another digital currency — BTC (Bitcoin) or ETH (Ethereum).
Now, you may think about how hard is it to select one. Well, the truth is that there are 2000 cryptocurrencies, with new ones coming every day. There are over 200 exchanges for you to choose from. Amidst all this madness it becomes imperative that You look into a few basic information and then take a dive.
To begin with, the two basic things you would need to look into first and foremost are Profitability and Security.
Profitability is the cornerstone of any business. If you cannot convert or transform your earnings into a profit then the entire effort becomes worthless.
Security is the premise on which everything is based. You will not be able to function effectively if you have to firefight security breaches most of the time.
How Profitable are the Crypto exchanges then?
To be honest, the crypto market is volatility personified. And the market does go through jitters from time to time. However, it is also helpful to know that a whole lot of digital assets go through these exchanges. That would translate into millions of dollars a day. A transaction fee of 2% is charged and if calculated on a yearly basis, it comes to almost a billion dollars.
Let’s take a quick look at the volumes of some of these exchanges:
The Top 3 (Binance, Huobi, and OKEx) individually did more than $1 billion trade volume on the day
· No 4 (Bitfinex) did a business of about $360m
· Only the top 20 exchanges did trades of more than $100m
· Only the top 66 (about a third of all exchanges) did more than $10m
How secure are the crypto exchanges?
Security is the byword for cryptocurrencies and for an exchange, the ultimate truth.
There have been breaches earlier and each came with a lesson:
Poor accounting and non-adherence to tax regulations lead to the Mt. Gox incident. The weakness was since plugged.
The DAO breach happened due to a bug within the system itself. This leads to better encryption.
Every incident has to lead the exchanges to fortify themselves further.
Crypto exchanges are the lifelines of the entire trading environment and choosing the best one is half the battle won.