What are Crypto-to-Crypto Exchanges and Why They are Important

Handy Tips / 18.01.2021

Crypto-to-crypto exchanges remain a critical part of the blockchain sector. These platforms help regular users exchange one kind of digital asset for another based on the given assets’ market value. Since the earliest days of the crypto market, there has been a demand for these services. Nowadays, there are a variety of different crypto-to-crypto exchange protocols in the market. 

Centralized Exchanges

Centralized exchanges are the most popular type of crypto-to-crypto exchange. These platforms allow users to load their funds onto network wallets and then swap their holdings via the exchange. Most centralized exchanges are custodial in nature, meaning you will need to place your holdings on the network before trading. The main advantage of a centralized exchange is simplicity and regulatory confidence.

DEXs

The second type of crypto-to-crypto exchange in use today is DEXs (decentralized exchanges). These platforms allow you to conduct trading activities directly from your wallet. These networks are better protected against hackers because they don’t hold large stashes of users’ crypto in network wallets. The downside of these platforms is that they are often unregulated. 

What Problems Does Crypto to Crypto Exchanges Solve?

Crypto-to-crypto exchanges help facilitate adoption and growth in the market. Before their entrance into the sector, users had to depend on forums and in-person transactions to procure more crypto. This strategy left the market sluggish because it was too difficult to facilitate trades efficiently in this way. 

Liquidity

Liquidity was one of the first benefits crypto-to-crypto exchanges brought to the market. For the first time, crypto users could quickly find the coins they desired and trade their holdings without delay. Today, crypto-to-crypto exchanges continue to play a critical role.

Open Access

Another advantage of crypto-to-crypto exchanges is open access to the market. In most countries, crypto exchanges only need to be regulated if they offer fiat-to-crypto trading pairs. Platforms such as Binance decided to forgo fiat-to-crypto trading pairs for years. This decision helped the exchange establish itself as a reliable option and furthered the public’s awareness of certain high-value altcoin projects. 

Credibility

New projects need liquidity to make a splash in the market. Crypto-to-crypto exchanges such as Uniswap make this goal possible. Users can monitor new coins and see what projects have the momentum to take flight. In most instances, getting your token listed is a crucial step in launching a project publicly. 

Benefits of are crypto to crypto exchanges

Crypto-to-crypto exchanges bring a lot of benefits to users. These advantages are easy to recognize when you consider that you had to meet someone in person before introducing exchanges. Imagine bringing $30,000+ to buy Bitcoin from a stranger. This would be the current state of the market if these handy platforms never flourished.

Selection

Users gain access to the full selection of the market using these platforms. Nowadays, there are crypto-to-crypto exchanges that allow new projects to join without charging a huge fee. Platforms such as Uniswap allow anyone to offer their coins to the public. This strategy has led to the birth of IEO (initial exchange offerings).

Exit The Market

Crypto-to-crypto exchanges also serve a valuable role as a way for traders to exit volatile markets. The introduction of stable coins has made these platforms even more valuable. Traders can escape market downturns by converting their tokens to stablecoins. Stablecoins are crypto-assets that derive their value from other assets. In most instances, these assets are some form of fiat currency such as USD. 

How Do Crypto-to-Crypto Exchanges Work

Crypto-to-crypto exchanges work similarly to regular stock exchanges. You are exchanging one cryptocurrency for another. In most instances, these platforms support the buying and selling of coins and fiat money exchange into crypto. Notably, most platforms charge fees for withdrawing money from the account. 

Rate

The rate you pay for your crypto depends on the actions of sellers and buyers. Each platform has a slightly different set of fees, limits, and options. It’s the buy and sells activity on each one of these exchanges that will determine your final price. Most exchanges calculate the price of Bitcoin based on trading volume on the network. 

Trading Pairs

Trading pairs are different crypto coin swap options. Trading pairs allow you to profit from the currencies changing rates. At this time, some of the most popular crypto-to-crypto pairs are BTC/LTC or LTC/BTC, and ETH/BTC or BTC/ETH. 

History of Crypto-to-Crypto Exchanges

The history of crypto-to-crypto exchanges begins in the early days of the market. In January 2009, apart from mining, the only way to acquire Bitcoin was by trading on forums or IRC. Sadly, this strategy required a great deal of trust that the other party would honor the transaction. Of course, this wasn’t always the case, and many investors fell victim to scams. Notably, the first official cryptocurrency exchange went live in March 2010.

Bitcoinmarket.com

Bitcoinmarket.com was the first real market for people to buy and sell Bitcoins with each other. The network represented a monumental improvement from exchanging on forums. It also provided one of the first true pricing mechanisms in the sector. The network pegged the price of Bitcoin at the launch at $0.003. A few months later, Bitcoin prices rose slightly to $0.05. By 2011, Bitcoin rose to $23.99.

Mt.Gox

In 2010, Jed McCaleb released Mt.Gox (Magic: The Gathering Online eXchange) to the public. This platform was an instant hit. Within months, Mt.Gox accounted for 70% of all bitcoin trades. A few months after launch, McCaleb sold the business to Mark Karpelès (aka Magical Tux). This sale occurred before a June 2011 hack. The hack saw a total of 2,650 BTC removed.

Despite the attack, Mt.Gox continued its rise to fame. By 2013, it was the world’s largest Bitcoin exchange. In February 2014, the exchange filed for bankruptcy. At this time, developers realized that since 2011, a hacker had slowly removed 844,408 Bitcoins from their hot wallets.

Crypto-to-Crypto Exchanges – Here to Stay

It’s hard to imagine a crypto market without crypto-to-crypto exchanges today. These platforms are vital for innovation and growth. As such, there are no more crypto-to-crypto exchanges than ever. Each new platform introduces some additional functionality that adds to the overall value of the market. As such, crypto-to-crypto exchanges are the heartbeat of the industry. 

David Hamilton aka DavidtheWriter is a long time Bitcoinist and cryptocurrency journalist. Currently, he has over a thousand articles published on blockchain technology. His expertise and experience makes him one of the most reputable writers in the sector.