Cryptocurrencies offer a plethora of opportunities, whether it is giving a student the ability to earn some extra money while studying, or parents being able to support their children studying abroad, and so much more.
These digital currencies have enabled what before was considered impossible. As such, many people have started exploring possible ways that they can get started with enjoying the benefits that the technology has to offer. If you are looking to get into cryptocurrencies, look no further, as this article will cover everything that you need to know to purchase cryptos.
What is a Cryptocurrency?
A cryptocurrency is a type of digital currency that is built on top of a blockchain network, which is a distributed ledger or record keeping system. The most unique feature of a blockchain network and cryptocurrency is the fact that there are no intermediaries needed in processing and verifying transactions in the network – making them decentralized.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform that connects crypto buyers and sellers. Meaning, anyone that is looking to buy or sell cryptocurrency is matched with someone else that wants to sell or buy cryptocurrency, and vice versa.
To facilitate this process, an exchange platform is built around a matching engine. This matching engine normally includes several algorithms that can match different types of orders with each other. The types of orders that a matching engine takes as input are limit orders, market orders, as well as buy and sell orders.
Given the central role in an exchange platform, the matching engine needs to be super fast and needs to have redundancy measures in place to make sure that it is always operational.
In the cryptocurrency market, there are two types of exchanges: centralized and decentralized exchanges.
Centralized Exchanges
Centralized exchanges are the most common gateway into the cryptocurrency space given the ease of use that they offer. These exchanges are owned and maintained by a central institution or organization.
Pros of a Centralized Exchange
Higher Liquidity
Being the most popular type of crypto exchange, centralized exchanges tend to have more liquidity when compared to decentralized exchanges. High amounts of liquidity are necessary because it ensures that your orders can be filled quickly and prevents small trades from moving the price of the crypto that you are trying to trade.
Has a Support Team
Sometimes there are moments when you wish there was a support team that you could reach out to if something goes wrong. Fortunately, a centralized exchange platform includes a support team. This is one of the main features that gives customers peace of mind when transacting on a centralized exchange platform.
Ease of Use
Centralized exchange platforms are simple to use and most have a user-friendly interface for the end user to interact with. Some exchange platforms even include a simple buy/sell functionality that completely removes the need to interact with a trading chart.
Cons of a Centralized Exchange
Security
Being a centralized platform, centralized crypto exchanges may contain some security vulnerabilities that can be exploited by cyber criminals. Most exchange platforms are aware of this and employ the latest security features and best practices. However, centralized exchange platforms do still get hacked, and users’ funds do get stolen.
Centralization
Cryptocurrency and blockchain technology were designed to be decentralized and remove the control that central institutions have over people’s finances. The fact that these platforms are centralized by design may drive away some die hard cryptocurrency enthusiasts who believe in a fully-decentralized financial system.
Not Your Keys, Not Your Bitcoin
This is a common phrase in the crypto community and serves as a reminder that if a person does not own the private keys belonging to a cryptocurrency wallet then they may not be in full control of the cryptocurrency held in the wallet in question. This is something to remain aware of when using a centralized exchange platform, which “manages” your wallet keys for you.
Decentralized Exchanges
On the other hand, a decentralized exchange is not owned or maintained by any single company. Instead, these types of crypto exchanges are deployed on the blockchain with their core logic programmed into smart contracts, which are pieces of code that cannot be altered or tampered with once they are deployed to a blockchain network.
Pros of a Decentralized Exchange
Decentralized by Design
A decentralized exchange platform is decentralized by design, so there are no intermediaries or third parties involved in the exchange process. This is extremely appealing to DeFi and Web3 enthusiasts.
Secure
Although not 100 percent secure, a decentralized exchange platform is a lot more secure than a centralized exchange. This can mainly be attributed to the decentralization that these types of exchange platforms offer, since there are a lot less central points of failures or vulnerabilities present for hackers to exploit.
Full Control of Your Keys
Since there is no central party involved in the process with this type of crypto exchange, you are in full control of your wallet’s keys. This is a good thing because all of the funds stored in the wallet will be under your complete control.
Cons of a Decentralized Exchange
Low Liquidity
Decentralized crypto exchanges are not the most popular crypto exchange type. As such, these platforms do not have the same high levels of liquidity as centralized crypto exchange platforms have.
Complex to Use
Decentralized exchange platforms are fairly complex to transact on and are a lot more complicated to use than centralized exchanges are. Some decentralized exchanges also don’t have very user-friendly interfaces and a trader is left to do a lot of the trading process themselves, part of which a centralized exchange platform does for you in the background.
No Support Team
There are no support teams for a decentralized exchange platform, and there is nobody that can help you if something goes wrong on the platform. This is because these platforms are independent and don’t necessarily have a team that maintains and owns them.
How to Buy Crypto on an Exchange Platform?
Research the Best Platform For You
The first thing that you will need to do before getting started with purchasing cryptocurrency is research which cryptocurrency platform has all of the features that you are looking for or need. These features can include the available fiat deposit options and the number or cryptos supported by the exchange platform.
For instance, if you are looking to purchase Cardano (ADA), then you will need to find an exchange that lists ADA as a tradable asset.
Other features to research are the trading fees that the platform charges and the security features available on the platform (if any).
Deposit Funds to the Platform
Once you have found the platform that you would like to use and have created an account with the platform, the next step would be to deposit fiat funds to the exchange platform. This can either be done straight from your credit or debit card, or via a bank transfer – depending on what deposit options are offered by the platform.
You can also deposit cryptocurrency straight to the platform from another crypto wallet that you own. This is usually the cheapest and quickest deposit option.
Purchase the Crypto
Once the deposited funds have reflected in your account on the exchange platform, you are now ready to purchase the cryptocurrency that you want to purchase.
To do so, head over to the trade tab on the exchange platform, select the cryptocurrency that you want to purchase, and click buy. Depending on the platform, there may also be a simple buy/sell tab. This is a much simpler way to purchase crypto but the fees may be a bit higher. Once again, this depends on the platform that you are using.
Difference Between a Market Order and a Limit Order
A market order is an order wherein crypto is bought or sold at the market price. These trades are usually instantaneous depending on the situation in the market at the time the order is placed and are filled relatively quickly given that they are at the market price.
On the other hand, a limit order is an order where the price of the trade is set by the trader or investor. These trades may not get filled depending on the price that is set for the trade. However, since these trades introduce some liquidity into the market until the trade price is met, the fees associated with these types of orders are generally lower.
Top Crypto Exchanges in the Market
The two top centralized exchange platforms in the market are Binance and KuCoin. Here is a comparison of the two.
KuCoin
KuCoin is ranked number 27 on the list of the biggest cryptocurrency exchanges in the world in terms of daily trading volume.
Launched in September 2017, KuCoin has established itself as a popular trading platform in the cryptocurrency community because of its elite safety and security features, as well as its wide list of available cryptocurrency trading pairs and DeFi services on the platform.
Binance
Binance is the largest cryptocurrency exchange in terms of daily trading volume. Launched in July 2017, Binance is well-known for its phenomenally large list of cryptocurrency trading pairs and DeFi services.
Binance also boasts one of the lowest trading fees in the cryptocurrency space – one of the main contributing factors to why it is the most popular cryptocurrency trading platform.
Both KuCoin and Binance are popular Asian-based exchanges that were both based in China. However, after the Chinese government cracked down on cryptocurrency and banned digital currency exchanges, they both moved to Hong Kong. Binance did however later move to Malta.
Comparing the Two Platforms
Both KuCoin and Binance use the same business model and have an almost identical fee structure. The main differences between the two platforms are the range of assets available on each exchange platform, their levels of security, and their customer support.
There are a few other slight differences between the two. A trader or investor might find that one exchange suits their needs better than the other exchange depending on what they prefer and what his or her needs are.
Fees Comparison
Both KuCoin and Binance fees start at 0.1%, and both exchanges offer lower fees as a trader or investor moves up trading tiers.
KuCoin Fees
KuCoin has a very aggressive tier structure when it comes to their trading fees, offering very competitive trading fees for higher-tiered traders and investors on their platform. If you plan on trading large volumes and moving up trading tiers, then KuCoin is the best choice. KuCoin also offers dividends of 50% of the exchange earnings on its token.
Binance Fees
Binance does not charge deposit fees and withdrawal fees depend on the asset. Fees on the platform are paid for using the Binance token. If you are a small individual trader and plan on remaining on lower tiers then Binance’s fee structure is better than KuCoin’s.
Also, if you want to trade in the futures market then Binance is the clear winner. The platform also offers better taker fees than KuCoin.
Assets Comparison
Both platforms advertise that they give traders and investors access to hundreds of altcoins that are normally difficult to purchase. Therefore, both KuCoin and Binance have a wide array of available cryptocurrency trading pair choices for investors and traders to choose from.
Binance offers up to 242 altcoins, and KuCoin offers support for 179 altcoins. Even though Binance wins when looking at the trading volume on both platforms, it is unlikely that the average cryptocurrency trader and investor will find KuCoin’s selection lacking.
Binance also offers the ability to trade using its BNB token or Tether as the base currency. On the other hand, KuCoin enables users to trade with either its native token, Tether, NEO, or BTC Cash.
The ability to trade in other tokens makes KuCoin a popular choice for cryptocurrency traders and investors. However, Binance’s fee structure on trades made using its native BNB token is very competitive.
Authentication Comparison
Two-factor authentication is available on both platforms, and both platforms have a good security history and have never been hacked.
Binance has had some problems with phishing attempts due to its large user base. However, this is not a reflection on the platform, and rather serves as a reminder to users to always double-check that they are visiting the correct website. It is important that if you as a user suspect a scam is taking place that you do not enter any information, such as your password, that can give the scammer access to your account. It is advised that users enable two-factor authentication every time they are given a chance. This way, users on both platforms can be protected.
Customer Service Comparison
KuCoin is known for its incredibly fast customer service, and also has a 24/7 telegram support chat with an exceptionally quick response rate.
On the other hand, Binance makes use of a ticketing system in their customer support. This means that there is a bit of a waiting time in response from the support team. Even with this being the case, Binance still does offer a customer service with response times quicker than many other cryptocurrency exchanges in the ecosystem.
The Main Differences Between KuCoin and Binance
Automated Trading
KuCoin offers its users automated trading and lending through its native free trading bot. Their bot can function in both the regular trading market and in the futures trading market. Having an automated trading bot means that users can put their cryptocurrency to work using KuCoin’s native trading bot.
This trading bot then trades potential profit-making opportunities by trading based on hardcoded logic programmed into the bot. All the user has to do is allocate a percentage of their cryptocurrency holdings to the trading bot and the bot will take care of the rest – giving users the opportunity to earn with their holdings apart from the speculative investing on their holdings.
Binance on the other hand does not offer a free native trading bot, but does offer API support for third party trading bots. This is one of the main differences between the two platforms.
Cryptocurrency Lending
KuCoin offers users a robust cryptocurrency lending platform, and has created a marketplace that connects lenders and borrowers who agree on an interest rate and a duration. KuCoin maintains the marketplace, adding reliability and some level of regulation to the whole process.
Although Binance does offer a cryptocurrency lending platform, users can only lend from Binance itself and are not connected with lenders as is the case with KuCoin.
To Recap
Cryptocurrency can be bought on an exchange platform, which can either be centralized or decentralized. A centralized trading platform tends to be the more preferred option between the two since it is simpler to use and offers greater levels of liquidity. The fact that it also includes a support team is another attractive feature for crypto traders and investors.
To get started purchasing cryptocurrency, simply select which platform you want to use, create an account on the platform, deposit funds, and purchase the crypto or cryptos that you want.
