What is an Ethereum exchange?
An Ethereum exchange is a marketplace where ether can be bought and sold. Commonly this is done through exchanging other cryptocurrencies for ether, although some exchanges allow you to trade fiat currency such as GBP and USD for bitcoin, which you can then exchange for Ethereum and other cryptocurrencies.
How do exchanges work?
Exchanges offer two ways through which you can trade Ethereum. These are:
- Market orders. With this order, you get the current best available price at the time of purchase or sale of your ether, and the order is executed instantly, making it the quickest way to buy and sell Ethereum.
- Limit Orders. A limit order allows you to buy or sell Ethereum at a fixed price. As soon as another user is willing to sell or buy at your specified price, your order will be executed.
How do I use an Ethereum exchange?
It’s simple. You start by setting up an account, and going through the necessary verification steps (like uploading documents to prove your identity and address). You can then make a deposit using your preferred payment method, or deposit cryptocurrency through the exchange’s wallet address to exchange for Ethereum.
Your payment method will dictate how fast the funds may arrive on your account. For example, funds deposited via bank transfer might take up to 5 days to show up on your account, whilst deposits made via credit card will usually appear in an instant.
What should I look for in an Ethereum exchange?
There are a number of factors to consider when choosing which exchange to use, these include:
Payment methods accepted
Exchanges usually accept different forms of payment. For example, exchanges like Binance do not accept fiat currency deposits at present, so you can only deposit cryptocurrencies. Furthermore, most exchanges do not accept PayPal due to the risks of chargeback scams. Make sure you find an exchange with the right payment methods for you.
This is probably the most important factor. Most exchanges will charge a trading fee, between the range of 1-2% on top of every transaction you have. The listed market buy and sell prices usually do not include this, so be diligent and compare the different trading fees offered by different platforms.
Not all exchanges are freely available in all countries. A brokerage like Coinbase only supports 32 countries, whereas an exchange like Binance supports all countries. Check that the exchange you want to use is available where you are.
There might be depositing and withdrawal fees that vary from exchange to exchange. They will often also depend on your payment method. Make sure your profits aren’t being too dented by the fees charged by the exchange.
Design and ease of use
An important consideration when choosing an exchange is how well designed the site is. You want to be able to focus on buying ether, not figuring out how the site functions.
Do I have to verify my account on an exchange?
Yes. You’ll have to verify your identity, and sometimes your address when signing up to an exchange. Exchanges are regulated and so need to know who is using them. You will usually be asked to provide a range of documents that show proof these two things, and often a selfie of yourself with the same documents for further verification.
Are Ethereum exchanges secure?
Ethereum exchanges have many security features, but are also a big target for online attacks. It is not recommended to hold anything other than ether you’re intending to trade on an exchange in its supported online wallet. It is advised that you transfer your ether to a personal cold storage wallet (hardware or paper wallet) to keep secure your funds safer.
What if I forget my password?
Exchanges will often provide for steps to reset a forgotten password through the email address/security questions you registered with when setting up your account. If there are extra security features on the website, you might be given a ‘recovery seed’, a collection of words that you can subsequently use to recover an account.
How fast are transactions on Ethereum exchanges?
Transactions on an Ethereum exchange are usually instant. It also depends on the type of order you have made. However, once an order is executed, funds will usually travel within a matter of seconds. This is not necessarily the case when transferring between exchanges, which will take slightly longer, as such transactions have to be verified on the blockchain.
What payment methods can I use to buy Ethereum on exchanges?
This depends on the exchange. Typically, most exchanges allow you to trade cryptocurrencies between each other, allowing you to use bitcoin or other altcoins to buy ether on exchanges. In regards to fiat currency, if they allow you to buy cryptos with fiat currency then most exchanges only allow for bank transfers, and some also allow debit or credit card payments. It’s not often that exchanges allow deposits from electronic wallets like PayPal.
Do exchanges charge fees for buying and selling Ethereum?
Yes, exchanges will usually charge fees for making transactions, by way of additional trading fees. These typically range between 1-2%, and are not included in the buying/selling price of ether. It is advised to compare trading fees between exchanges to ensure you are trading with competitive fees. Exchanges might also further charge deposit or withdrawal fees, but these are largely uncommon. They also largely depend on your payment method. For example, deposits made with bank transfer usually do not come with an additional service fee, but with credit cards there’s often an additional charge.
And do they charge fees for transferring in and out of my account?
Typically, no. When transferring coins to another wallet or exchange, you will only be charged transaction fees associated with the Ethereum blockchain (known as ‘gas’). This often varies, but the transaction fee is often negligible, and will usually be less than £1 worth of ether. However, some exchanges are known for having a small withdrawal fee, such as Binance with their 0.01 ether withdrawal fee.
Do I need an Ethereum wallet to use an exchange?
No, usually you will have an online wallet provided by the exchange that holds your ether and other cryptocurrencies. However, it is strongly recommended that you do get your own personal cold storage wallet to transfer your ether from the exchange wallet for maximum control and security of your own funds.
What are the other platforms that I can use to buy and sell ether?
The other commonly used platforms are brokerages and CFD trading platforms. Brokerages manage your buying and selling for you, whereas CFD platforms are more focused on making quick trades to take advantage of market fluctuations on the price of Ethereum, without actually having to own or manage the ether.
Should I use an Ethereum exchange?
Frankly, it’s up to you. If you want to trade ether for other cryptocurrencies, and don’t mind the extra complexity in comparison to brokerages, an exchange is the best option. Exchanges are the most common way to buy and trade ether and other cryptocurrencies.
Where can I find the best exchanges?
Right here. We’ve compared all the exchanges out there to find the most reliable and recommendable platforms, and reviewed them all for you.