Exchanges

A bitcoin exchange is a company that buys and sells bitcoin for money, such as dollars or euros. To choose one, look at who runs it, what it charges, whether it is registered where you live, and how it lets you withdraw your coins. Most exchanges also hold coins for their customers, so the choice matters.

What does an exchange do?

An exchange matches buyers with sellers, or it sells coins from its own stock. You deposit money, place an order, and the coins appear in your account. Exchanges charge fees for this service. A fee can be a percentage of the trade or a gap between the buy and sell prices, so read the fees before you trade.

For the steps to buy, read how to buy bitcoin safely. This page explains what to look for in an exchange and why it matters where you keep your coins.

How does an exchange account work?

The balance you see is a record in the exchange's own database. Nothing has moved on the blockchain yet. The coins move on the blockchain only when you withdraw them to an address that you choose.

What is custody, and why does it matter?

Custody means who holds the keys. If an exchange holds your coins, the exchange holds the keys. You then trust the company to keep them safe, to pay you back when you ask, and to stay in business. If any of those fail, your coins can be lost, and most exchange balances are not protected the way a bank deposit is.

Two cases show the risk. In 2014, customers of Mt. Gox lost access to their coins after hacks and mismanagement. The exchange first reported about 850,000 bitcoin missing. In November 2022, FTX stopped customer withdrawals and then filed for bankruptcy. Customers could not get their coins out.

Bitcoin users sometimes say "not your keys, not your coins." It means that holding your own keys is what keeps your coins under your control.

Should you keep coins on an exchange?

An exchange is a practical place to buy, and to hold a small amount for a short time. Some people leave larger amounts there, because it feels safer than managing keys. That choice is valid, but you should know the trade-off. For savings, most people prefer to withdraw coins to a wallet they control, and then manage the backups themselves.

What is KYC?

KYC stands for know your customer. It means the exchange checks who you are before you can deposit or withdraw. Regulated exchanges in many countries must do this under anti-money-laundering rules. The check usually asks for a photo ID and sometimes proof of address.

ID has a privacy cost. Once an exchange knows that you own an address, its records of your withdrawals can point to that address. Bitcoin's record is public, so anyone can follow coins from a known address. Keep that in mind before you choose.

Some exchanges do not ask for ID. They give you more privacy, but they are often smaller, offer fewer protections and carry more risk. We do not rank or recommend exchanges. The right choice depends on where you live, how much you buy and how much privacy matters to you.

What should you check before you use an exchange?

• Who runs it. Look for a named company, a registered address and people you can check.
• Whether it is licensed or registered in your country.
• The fees, shown in full before you deposit any money.
• How withdrawals work, and whether you can send coins to your own address.
• Whether it requires ID, and what that means for your privacy.
• How it protects logins, such as two-factor authentication, and how it handled past incidents.

Be wary of promises of guaranteed returns. Be equally wary of pages that look more like a trading game than a service.

How do you withdraw to your own wallet?

1. Open your wallet and create a receiving address.
2. Copy the address, then check every character after you paste it, or at least the first and last ones.
3. In the exchange, choose withdraw, paste the address and enter the amount. Confirm that the network is Bitcoin.
4. Check the network fee that the exchange charges.
5. The first time, send a small test amount. Wait for it to confirm, then send the rest.

Once the withdrawal is confirmed, the coins belong to the keys in your wallet, and the exchange no longer controls them. The sending page explains confirmations, and the security page explains how to protect those keys.