Once you have determined the type of cryptocurrency you want to buy, the next step is to establish a digital wallet to store it in, which is usually determined by the cryptocurrency type or the developer of the coin, or it can be made by a third-party developer. You can also use a hardware wallet, which is similar to a USB stick, to store your crypto.
Once you have completed the exciting task of obtaining a digital wallet, you are then ready to participate in digital currency exchange.
There are three ways to buy, sell, and exchange different cryptocurrencies, including:
Peer-To-Peer Crypto Exchanges
Peer-to-peer cryptocurrency exchanges, which are also known as decentralized exchanges and made popular by Bitcoin, are open-source crypto trading platforms that enable traders to conduct independent barters of digital coins on the web.
In other words, there is no central server or third party sources involved in the transaction. Therefore, it requires traders to have some technical knowledge concerning the transfer of cryptocurrency from one digital wallet to another.
The funds are also not insured during decentralized crypto trading, and there is also no customer service. Traditional money is also not accepted, so your only option may be to trade one cryptocurrency for another.
However, the fees are lower than other exchange platforms, and the transactions are often faster when conducting a peer-to-peer crypto exchange.
Third-Party Crypto Exchanges
Third-party crypto exchanges, also known as centralized exchanges, involve a centralized platform where cryptocurrencies are purchased and exchanged similar to the stock market.
These platforms have a third-party company that oversees crypto transactions to ensure they are legitimate.
Third-party crypto exchange platforms also enable traders to exchange traditional currency for digital coins. You can also link your bank account or debit card to purchase cryptocurrencies.
Cryptocurrency owners can also trade their digital coins for other digital coins in centralized crypto exchanges, as well.
However, the main benefit of using a centralized cryptocurrency exchange platform is that it enables traders to make cryptocurrency transactions with confidence.
Decentralized/Centralized Crypto Exchanges
Decentralized/centralized crypto exchange platforms, also known as hybrid cryptocurrency exchanges, offer the freedom of peer-to-peer exchanges while also providing the security of a centralized exchange platform.
Once you have chosen the right exchange platform for you, open an account and then add funds, so you are ready to purchase cryptocurrency. If your account is with a centralized crypto exchange platform, you can also store the digital coins at the exchange for safekeeping.
In the end, exchanging different cryptocurrencies can be both convenient as well as lucrative, depending on your reason for purchasing digital coins; however, according to the experts at SoFi Invest, “you should consider buying crypto from a company that provides a secure platform, as well as a digital wallet, and that also provides learn-as-you-go education in cryptocurrency to help build trust.”
But because purchasing and trading cryptocurrencies still comes with its share of risks, you should be sure to do your homework for the best outcomes.