Crytocurrency Exchanges: Basic Terminologies Pt. 1

Hello everyone and welcome to my blog
As we all know the Cryptocurrency space invloves mainly investments into digital currencies when have the ability to a appreciate in value over time based what real life case it solving as well as how the public perceive it usefulness.

Now, for majority of players involved within the Cryptocurrency space be it long term investors, active or passive traders, one skill is very vital, that is how to trade on cryptocurrency exchange sites.

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What are cryptocurrency Exchange sites

In very simple terms cryptocurrency exchanges are just referred to as websites where these digital currencies are traded for one another, they can be said to be market place where one digital currency is exchanged for other digital currency.

Cryptocurrency exchange site are broadly divided into two although they work in very similar ways in terms of functionality

• Centralised Exchanges [CEX]

Centralised exchanges work in the same way as banks do, the use of a middle man or third party to help conduct transactions. Buyers and sellers alike trust this middle man to handle their assets, this is common in a bank setup, where a customer trusts the bank to hold his or her money.

In the case of cryptocurrencies, which are often stored in digital wallets, an individual can lose hundreds or thousands of dollars in digital currency holdings simply by forgetting the key to a wallet. A centralized exchange will not allow this to happen, as it safeguards the holdings in place of the individual investor.

Example of these kind of exchanges are Binance, Yobit, Mercatox etc.

• Decentralised Exchanges [DEX]

Decentralized exchanges are an alternative to the centralized kind of cryptocurrency exchanges, they help to cut out the middle man, generating what is often thought of as a "trustless" environment. These types of exchanges function as peer-to-peer exchanges. Assets are never held by an escrow service, and transactions are done entirely based on smart contracts and atomic swaps.

Examples of these kind of exchanges are forkdelta, Etherdelta, IDEX, etc

Basic Terminologies for Cryptocurrency exchanges

As said initially, all crytocurrency exchanges work basically in the same way to aid trading of different digital currencies, therefore some functions and terms on various exchanges are very similar, these terms and functionalities are the basic to understanding how trading of cryptocurrencies works, so using screenshot from a popular Cryptocurrency site Mercatox I will be explaining these basic terms and functionalities in a way that is understandable, so let's dive quickly into it.

• Trading pairs

Trading pairs refers to the price index of one crytocurrency against another Cryptocurrency, this is mostly measured in terms of Satoshis, to be able to understand how to trade on a crytocurrency exchanges, you must be certain that such Cryptocurrency pair is available on such exchange.

From the above picture we can see the available trading cryptocurrency pairs to be ETH/BTC(Ethereum/Bitcoin), LTC/BTC(Litecoin/Bitcoin) etc, before trading on any exchange it is very important that the most suitable pairs are chosen and traded with.

• Price

For any cryptocurrency exchange we have discussed that trading pairs are the basic characteristics of these exchanges, now alone with these trading pairs are the price, the price of any trading pair is mostly measured in terms of it's Satoshi Value, the Satoshi Value refers to the smallest divisible unit of Bitcoin and it has a value of 0.00000001.

So for the trading pair of ETH/BTC in the creenshot above simply means the price of Etherum in relation to Bitcoin is 0.07401752(that is seven million four hundred and one thousand seven hundred and fifty two satoshi), also taking a look at the HBZ/ETH pair simply means that the price of Helbiz in relation to the Etherum is 0.00002925(Two thousand nine hundred and twenty five Satoshi).

• Volume

Volume on any crytocurrency exchanges simply refers to the amount of that cryptocurrency that is being traded at that particular exchange, it further goes on to describe the amount of people trading on such exchanges for a particular trading pair, a particular trading pair might be on different exchanges but at different volume, in such case it is advisable to trade at an exchange with the highest volume.

• Change

This simply refers to the change in price for a particular cryptocurrency pair over a particular period of time which is mostly 24 hours, this change in price could be either positive or negative and this is dependent on interaction between the market forces of demand and supply.

If the change is indicated by a red colour it means that the change in price of such pair has decreased over the past 24 hours, but if it is indicated by a green colour, it means tag the price of the the trading pair had increase by the indicated amount over the last 24 hours.

So there you have it, in my next post I will be concluding these basic terminologies of cryptocurrencies exchanges to help us fully understand how trading on these sites work.