Lesson 1: What do cryptocurrency exchanges do?

Why does this lesson matter?

Cryptocurrencies can be obtained by purchasing them with fiat money. We will now learn about exchanges, which are necessary for this purpose. Exchanges are also very important players when considering cryptocurrency from a business perspective, so let's take the time to understand them thoroughly.

What you can learn in this lesson

  • What do cryptocurrency exchanges do?
  • Definition of a cryptocurrency exchange

What do cryptocurrency exchanges do?

The second of the three ways to obtain cryptocurrency is to purchase it on a cryptocurrency exchange.

Exchanges are organizations that exchange cryptocurrencies for fiat currency, and they exist all over the world in accordance with the laws of each country.

Users open an account with an exchange and transfer fiat currency such as US dollars to a designated account.

Then, a currency called USD, which is the currency code for the US dollar, will appear in the account on the exchange.

You can then use this USD to purchase cryptocurrencies such as Bitcoin and Ethereum.


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Let's understand the definition of a cryptocurrency exchange

In order to operate a cryptocurrency trading service, you need a license from the regulatory authority of your country.

Therefore, operating a cryptocurrency exchange without a license may result in warnings and penalties from the regulators.


It varies from country to country, but basically, a license is required if you want to broker the exchange of fiat currency for another person's cryptocurrency.

When trading cryptocurrencies, be sure to check that the cryptocurrency exchange you are using is properly licensed by the country's regulator.


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