How easy is it to operate a bitcoin exchange?
Peter A bitcoin exchange is a digital marketplace where traders can buy and sell bitcoins using different fiat currencies or altcoins. A bitcoin currency exchange is an online platform that acts as an intermediary between buyers and sellers of the cryptocurrency.
Understanding Bitcoin Exchanges
Bitcoin exchange platforms match buyers with sellers. Like a traditional stock exchange, traders can opt to buy and sell bitcoin by inputting either a market order or a limit order. When a market order is selected, the trader is authorizing the exchange to trade his coins for the best available price in the online marketplace. With a limit order set, the trader directs the exchange to trade coins for a price below the current ask or above the current bid, depending on whether they are buying or selling.
To transact in bitcoin exchange, a user has to register with the exchange and go through a series of verification processes to authenticate his or her identity. Once the authentication is successful, an account is opened for the user who then has to transfer funds into this account before he or she can buy coins.
Different exchanges have different payment methods that can be used for depositing funds including bank wires, direct bank transfers, credit or debit cards, bank drafts, money orders and even gift cards. A trader who would like to withdraw money from his or her account could do so using the options provided by his exchange which could include a bank transfer, PayPal transfer, check mailing, cash delivery, bank wire, or credit card transfer.
Makers and Takers
Online bitcoin marketplaces usually designate bitcoin exchange
participants as either makers or takers. When a buyer or seller places a limit order, the exchange adds it to its order
book until the price is matched by another trader on the opposite end of the transaction. When the price is matched, the buyer or seller who set the limit price is referred to as a maker.