Virtual Currency Exchange (An Overview) - Tectum Blockchain Virtual Currency Exchange (An Overview) - Tectum Blockchain

Virtual Currency Exchange (An Overview)

In a previous article on “How to Buy Bitcoin”, We discussed how a virtual currency exchange is an online marketplace where people trade virtual currency.  To understand the concept of virtual currency exchanges further, one needs to understand the concept of virtual currency itself.

Simply put, a virtual currency is a unit of value exchange whose value is purely digital and which has no physical incarnation. In order words, it cannot be seen or touched. It can only be represented by a symbol on a digital device.

There are different types of virtual currencies. There are open virtual currencies that function in an open ecosystem and can either be converted to other forms of virtual currencies or even physical currencies closed currencies on the other hand operate within a closed ecosystem.

 

What is an example of Virtual Currency?

While virtual currencies are digital currencies that operate in a similar space, i.e. online, and all virtual currencies are digital. However, not all digital currencies are virtual. Central Bank Digital Currencies for example are only digital versions of physical currencies.

An example of a virtual currency will be cryptocurrency. It is created on the blockchain and is decentralized and unregulated. It is also only traded between individuals as a medium of exchange digitally. Tokens are also another example of virtual currency.

 

What is the Most Popular Virtual Currency

The most popular virtual currency at the moment is  Bitcoin (BTC). Currently valued at 1 BTC to $18,600 it is one of the most traded virtual currencies at Virtual Currency Exchanges around the world.

USDT Bitcoin Softnote
Fun fact: Tectum Softnotes are linked to Bitcoin on the blockchain

What is a Virtual Currency Exchange

Virtual currency exchanges are sites where virtual currencies can be traded between individuals or organizations

Virtual exchanges work like your online broker. You can perform a variety of functions such as exchanging your fiat money or CBDC for virtual currency and vice versa. You can also convert bitcoin into its equivalent in another virtual currency and vice versa, There are several good crypto exchanges on the market like crypto.com, Gemini, BitMart Exchange Kraken, Bisq, etc.

How do you use a Virtual Exchange?

To create an account on most virtual currency exchanges you will need personal identification documents. Most Crypto Exchanges and networks are bound by Know Your Customer regulations, in which they must have the verified identity of all the customers on their platform.  Also, you need a secure connection to the internet, to protect your private information.

Finally, you need to create your virtual currency wallet, an account outside your exchange account in which you can put your money. Think of it as the difference between your bank account and your physical wallet. In this case, the bank monitors the transactions that go in and out of the account, and if someone deposits money into your account you can take it out and put it in your wallet.

 

How Many Virtual Currency Exchanges are there?

There are thousands of virtual currency exchanges. Virtual exchanges like crypto.com, Biso, Bittrex, Gemini, BitMart Exchange Kraken, and Bisq among others, are all popular virtual currency exchanges that give very good offers.

 

What is the Best Exchange for Cryptocurrency?

This is difficult to determine because every trader has their preferences for choosing the Virtual currency exchange they trade on. However, the most popular Virtual currency Exchange is still  Coinbase. Coinbase offers several options for the virtual currency trader. Its exchange is very secure, it has a low limit for the amount of bitcoin you can buy ($2), it offers the opportunity to trade in more than 1000 cryptocurrencies ( one of the largest crypto databases in the world), the site gives you the latest updates in the crypto market and the current exchange rate of crypto to fiat currencies, among other benefits.

 

Can We use Virtual Currencies as a Replacement for Physical Currencies?

As much as enthusiasts, traders and investors will tell you that virtual will soon replace physical currencies, they point out how the lack of a regulatory agency such as a central bank or a tax agency means the owner of the coin owns the coin 100% and measures such as the government freezing your bank account to punish you, or extorting you of your money don’t apply. They also point out how virtual currencies like bitcoin are decentralized and transparent and can prevent financial misappropriation like money laundering and embezzlement. However, there are equally as many reasons why virtual currencies cannot replace fiat currencies some of them are as follows

  1. Governments will not trust money that they cannot track.

Part of the reasons why a country like China and countries in Africa like Nigeria and the Central African Republic have banned cryptos is that they believe that it is dark money that is not regulated by any central authority and can be used to commit a crime or undermine the country’s sovereignty.  And their fears are not unfounded either. Already as much as 3 million out of the 18 million bitcoin in circulation cannot be accounted for, which puts a large check on crypto as a medium of exchange. Thus the first step to restoring the required confidence is to subject virtual currencies to some form of regulation to gain some trader and investor confidence

  1. Physical currency is backed by the Economy of the currency

The Euro for example is backed by the economy of the European Union. As such its value is stable as the economy of the countries in the EU) virtual currencies are not backed by anything, so you could buy crypto worth $10,000 today, and tomorrow it would be worth $0. That is why it cannot be trusted by the general population.

  1. Its supply is limited

For example, there is only 21 million bitcoin in the world, to keep the crypto stable. That is not enough for the over 400 million people in the United States of America alone, not to talk of people outside the United States itself. Even though there are thousands of cryptocurrencies right now in circulation, the number is still not enough for them to be viable replacements for physical currencies.