A brainchild of Vitalik Buterin, Ethereum is a complete blockchain ecosystem that acts more like a virtual computer. Powered by its native token Ether (ETH, commonly referred to as Ethereum itself), the open-source, peer-to-peer ecosystem is the second-largest cryptocurrency by market capitalisation.
Buying and selling of Ethereum have become popular and there are several crypto exchanges today that can help you do that easily. We have selected a few from the vast variety and have extensively looked at their features and benefits to bring you the best Ethereum exchanges in 2021.
Our List of The Top Ethereum Exchanges
Listed below is our selection of the best Ethereum exchanges, each exchange has its pros and cons and unique features mentioned for you:
What Is an Ethereum Exchange?
Before Ethereum, blockchain technology was largely associated with cryptocurrencies and financial transactions. Vitalik Buterin believed that the technology was under-used and that different applications could be built from it. This resulted in Ethereum and its accompanying Ether token. The token powers all the transactions on the network and is used as a reward for miners when they add a block.
Ethereum has gained immense popularity, especially due to the numerous ICOs and platform launches on the network. The increasing value makes it an excellent choice for traders for buying and selling to make profits. Today, Ethereum exchanges offer varying levels of services, from very basic such as instant swaps to derivatives like Futures, Perpetuals and even leveraged trading.
How Do Ethereum Exchanges Work?
Ethereum exchanges are platforms that work on the basic rule of trading: buying and selling of assets such as Bitcoin and Ethereum. These marketplaces connect different traders from all over the world who then agree to exchange their assets on agreed prices and rates.
To begin trading, a person should first register on one of the exchanges. If you are interested, use our above-given list for the best Ethereum exchanges in 2021. Head over to the exchange of your choice and tap on the signup or register option, usually located on the top right side of the website. Many exchanges also have mobile apps so if you are using your cell phone, you can download their app from the relevant app store.
The registration process varies from exchange to exchange, but there are a few fundamentals that are the same across all, such as entering your name, email address, and creation of a username and password. Provisional information may require a mobile number and even the country of citizenship.
A reputable Ethereum exchange will also ask for additional information and documentation under Know Your Customer (KYC) and Anti Money Laundering (AML) regulations. This information may include:
- Uploading government-issued ID.
- Proof of residency.
- Income Source.
- Bank Statement.
Depending on where the Ethereum exchange is located, there may be other requirements as well. It is also the prerogative of the exchanges on when to ask for these checks. This may be a part of the registration process or mandatory immediately after the registration. Some exchanges even create different levels of KYC checks, each level unlocking different trading features and enhancing limits.
The regulation checks can be a bit cumbersome at times and a bit unnerving as a lot of private information is being handed over to the exchange. In this scenario, people might lean towards exchanges that do not ask for any KYC documentation or information, but this has a far bigger implication. These exchanges are skirting the law already and the chances of you losing your crypto assets isn’t worth the risk.
After registration (and any KYC/AML approval), users can start trading. The next step in buying and selling Ethereum is getting the exchange account funded. If you already own crypto assets, you can go to the wallet option in your exchange. Using this, traders can transfer their tokens and coins from their own Ethereum wallets to their exchange.
In case a user doesn’t have any cryptocurrencies, they can look for a fiat option in the exchange. Many exchanges support buying and selling of cryptocurrencies through fiat. If your exchange has this, look for options such as linking your bank account or using your debit and credit card for purchasing. Alternatively, you can head over to a peer-to-peer exchange that allows fiat buying of crypto.
Once the account is funded, the user can head over to the trading interface. Depending on the type of customer the exchange is catering to, the interface can be very plain or show varied information. In any case, the user will need to select a trading pair. The pair is represented by the cryptocurrency in question and a base one. ETH/USDT trading pair, for example, shows the user the Ethereum price in terms of the USDT stablecoin. The trader can buy Ethereum by paying USDT or sell off Ethereum for USDT.
Withdrawing is also very straightforward in Ethereum exchanges. Navigating to the exchange wallet, traders can select the cryptocurrency they want to withdraw and enter the number of coins and the destination wallet’s public key.
People looking to deposit and withdraw cryptocurrencies are advised to be very careful in noting down the wallet addresses. Blockchain transactions are a one-way street and once executed, cannot be reversed back. Sending cryptos to the wrong address or a different blockchain network means the coins are lost forever.
Using an Exchange Vs a Broker
While Etherum exchanges give users access to a whole new financial system for selling and buying cryptocurrencies to make profits, these platforms are aimed towards people who would like to actively buy/sell and trade directly. For people who would prefer to have an investment expert do trading on their behalf, a broker is a better option.
The client never actually buys the cryptocurrency and the broker only offers different contracts of cryptocurrencies, letting the client pocket the profit (minus the broker’s fee, of course).
Leveraged products offer anywhere from 3 times to 100x exposure, with the broker investing money along with the client’s, buying crypto, while charging an interest against the loan. When the position is closed at a higher position, the loaned amount is returned to the investor, along with any interest or other charge, giving the client his original money and the difference (profit). Through this, a client can multiply his or her profits many folds. A drawback to leveraging is that the elasticity of profits also mean greater losses, as the broker can liquidate the order if the Ethereum price falls and recover the invested money, leaving nothing for the client.
Contract For Differences (CFDs) is a speculative contract that allows a person to buy a contract with speculation of the rise in the value of the underlying asset (Ethereum in this case), paying a premium above the market rate. The contract can be closed anytime, with the difference between the contract rate and the market value being pocketed as a profit (or a loss).
Futures is another speculative product that closes at a predetermined time, with speculation of the value of Ethereum (or any other underlying crypto) at that time. On expiry, if the market price is lower, the difference is paid out to the buyer as profit, after the broker taking his cut of the fee.
Perpetuals is a variation of the Futures that doesn’t have any expiry time as such, but interest rates do apply, along with the broker’s ability to liquidate the contract if the Loan to Value Ratio (LVR) falls below a certain point.
Types of Exchanges
- Centralised Exchanges: Using traditional central servers to host data and the whole platform, most Ethereum exchanges are centralised. They offer higher trading speeds and liquidity, but due to their single point of failure, can be hacked. The traders transfer over their Ethereum and other cryptocurrencies so technically they are at the mercy of these exchanges.
- Decentralised Exchanges: Running on the blockchain technology themselves, these exchanges are sometimes referred to as non-custodial platforms as traders don’t need to hand over their crypto assets to trade. Smart contracts and liquidity pools replace the escrow and order books. Traders connect their Ethereum wallets to the exchange and use smart contracts to swap assets. Drawbacks include the slower speed of exchange (due to block confirmation time) and price variation during the execution (slippage).
- Local Exchanges: Though many exchanges offer trading services at a global level, some are only catering for users within physical borders. These exchanges can be fully-fledged or even peer-to-peer ones.
- Fiat Vs Pure Exchanges: Pure exchanges only offer crypto to crypto trading pairs, with each crypto coin traded against another. Fiat exchanges, on the other hand, offer crypto to fiat pairs, enabling deposits and withdrawals of fiats.
Key Things to Consider When Choosing the Best Ethereum Exchange
Through every Ethereum exchange offers the same basic principle of providing a marketplace and a platform for people to connect and start buying and selling cryptos, each one has its features and benefits. There are different aspects that any traders should consider before making a selection on registering to a particular exchange.
Security is paramount. Cryptocurrencies such as Ethereum have jumped many folds in the last decade, making the Ethereum exchanges very lucrative targets for hackers and scammers. If an exchange has vulnerabilities, it can lead to your assets being stolen.
At par with security priority, the reliability of the exchange and its team is also important. An exchange that frequently goes offline and requires maintenance means its users are unable to trade or withdraw their Ethereum. The team should also be reliable, with a proven track record. Scammers have gone all the way to build exchanges and eventually run away with the deposited coins and tokens.
The design and ambience also affect the ability to trade. Exchanges can have a complex interface, with different visual and numeric containers showing data like price graphs, order books, open orders, etc. Simpler exchanges can have a lesser amount of data for the beginner trader. Select the exchange that has a feel more comfortable to your liking.
Ethereum Exchanges make an earning through charging its traders fee for trades made, including deposits and withdrawals. If you are a frequent trader, you might want to look into an exchange that offers a lower trading fee.
There other dozens of things that might affect your decision, like fiat support, liquidity, order types etc. Take all of these into account while making your decision.
Pros and Cons of Using Ethereum Exchanges
With this guide on Etheruem exchanges, you will now have a fair idea of what platform will serve your interest. Each exchange has features that you may like. Weigh in all of the pros and cons to determine what exchange suits your needs, taking into account the key factors and the type of the exchange itself.
Frequently Asked Questions
GAS refers to the amount of ETH required to execute a transaction.
Stablecoins are a class of cryptocurrency which are pegged to fiat in a 1:1 ratio so they maintain their value.
Decentralised Ethereum exchanges use the same blockchain, meaning Bitcoins cannot be traded. wBTC is an Ethereum based token that represents Bitcoin, hence, the name Wrapped BTC.
Both. As exchanges expand their operations, they have started to offer brokerage services along with spot trading.
Due to block confirmation time, perhaps your transaction is still pending. Check the transaction ID on an Ethereum block explorer for confirmation.
It is one of the most common token standards that many Ethereum based coins use to run frictionlessly on the Ethereum blockchain and exchanges.
Ethereum is testing out its next iteration of switching over to Proof of Stake from Proof of Work. You can lock your Ethereum in staking where your tokens secure the network and get rewarded in it.
Centralised exchanges don’t use private wallets and store your Ethereum on their own, letting you trade on their servers. You can access your assets in the wallets section of the exchange.