You may have an account at the bitcoin exchange where you hold funds in your local currency and you use that account to trade for bitcoins. From that account, you would send the bitcoins to your preferred wallet and use the bitcoins as you see fit — similar to how you would use local fiat currency held in your checking account.
A bitcoin exchange usually takes the form of a website, though there are a few physical exchanges out there (discussed later on in this chapter). When it comes to choosing an exchange, you've got plenty of choice of providers. Depending on your geographical location and the type of fiat currency you use, certain exchanges may be preferable to others. At this time, there is no bitcoin exchange that services all countries in the world, due to legal reasons.
Check out the list of exchanges linked from the Bitcoin.org website or review a current guide from an online news site such as Coindesk.
You can check them out here:
The main goal of any bitcoin exchange platform is to facilitate the transfer from and to physical currency to and from digital currencies, such as bitcoin.
Anyone can create an account at a bitcoin exchange without having to buy bitcoins at that time or owning bitcoins beforehand.Here's the way an online bitcoin exchange works (the actual details will vary depending on the exchange you sign up to):
- You sign up for a user account by providing basic information.
- You then receive an e-mail in your mailbox to activate your account.
- Once you have activated your account, the actual registration process begins.
As you might expect from exchange services, they are the leading indicators of how current market prices are fluctuating. In the case of bitcoin exchanges, these prices can fluctuate by quite a bit, as each business runs on a slightly different business model. Some bitcoin exchanges will pay you less when selling bitcoin and ask a slightly lower market price when you want to buy bitcoin. Other exchange platforms will offer you the current market value but take a small cut (0.05–0.5 percent) per executed transaction as commission.
Even though bitcoin is all about supply and demand based on the open market, buyers and sellers still need to be connected. Most bitcoin exchanges use a trading engine, which automatically matches buy and sell orders on both sides of the order book. However, there are other options too, such as local peer-to-peer trades.A very important aspect of bitcoin exchanges is the fact that some — though not all — platforms allow you to exchange BTC to a global currency that is not necessarily your local currency. For example, if you live in China, your local currency is the Chinese Yuan. However, if you want to get your hands on U.S. dollars (USD), euros (EUR), or British pounds (GBP), you may choose to use a bitcoin exchange trading in those currency pairs.
When attempting to make a withdrawal to your bank account, the value may still be converted to your local currency if your bank doesn't accept foreign currency transfers. Always do some research before attempting these types of transfers and make sure you are prepared for any associated risks in doing so.
Bitcoin exchanges are obliged by their local laws and respective national regulators of financial services and products to obtain some of your personal information. This information includes, but is not limited to, your full name, address, phone number (mobile and/or landline) and country of residence. On top of that, most bitcoin exchanges require you to fill in your date of birth, which is part of the identity verification process.