How Bitcoins Exchanges And Wallet Works


Bitcoin was created in the year 2008 when Satoshi Nakamoto created a peer to peer electronic cash system, that is now used worldwide. In the year 2009, the month of January, the first blockchain was mined and the Bitcoin client was then released to the public and after that, the whole Bitcoin network was established. If you are planning to start trading with Bitcoin, then it is very important to know how these Bitcoin exchanges and wallets work as well.

How do Bitcoin Exchanges work?

The Bitcoin currency exchanges work in a manner which is similar to banks. The user first deposits amounts of money in terms of the currencies supported by the exchange, into his own account in the exchange. This currency balance in the user account is used in order to trade with other users of that exchange and then withdraws that amount of money. This type of transaction is not as same as the over-the-counter transactions, as there is no risk of people not fulfilling their side of the transaction – as long as the exchange does not commit any fraud or try to withhold any money by itself.

The exchanging system is carried out by placing ‘Buy’ or ‘Sell’ orders placed on the exchange system software, which then matches with each other user. The ‘Buy’ orders are used to buy Bitcoins in exchange for any other currency, at a maximum price per Bitcoin, set by offerer. Similarly, ‘Sell’ orders are offers that are used to sell Bitcoins at a minimum price per Bitcoin. If the bid made by the buyer is more than the price of the sell order, then the exchange can be performed, and therefore the transaction will take place. Any type of communication with the best bitcoin exchange, is done with a standard web browser, over a secure SSL connection.

How do Bitcoin Wallets work? 

Bitcoins are mainly stored inside wallets, but these wallets do not work like monetary wallets, like PayPal accounts. These wallets, like the Ledger Nano S review, do not store the Bitcoin itself, but only store the public key as well as the private that is used to make a transaction on a Bitcoin exchange. So, if you’re planning to receive Bitcoins, then this public key will come in handy. Similarly, if you’re planning to spend or send Bitcoin to someone else, then this private key will be used.

Apart from these keys, a user will also have access to a wallet software, designed by the specific Bitcoin wallet company as well. This software will check for any Bitcoins accepted or sent from your public or private keys. Most of the work is handles by the wallet software, so a user only needs to keep his or her wallet password protected and he or she will be good to go. In case if a wallet company closes, the user will not lose access to his or her Bitcoins, as long as the private and public key addresses are still with the user. These keys will help the user to find the Bitcoin money later onward.


Please enter your comment!
Please enter your name here