The world tends to new technology daily because the youth is too indulged in technology. The new technology creates new problems and solves issues; a new technology comes into existence, which is how the cycle works. When the bitcoin technology came, there were also a lot of problems people were facing in buying and selling cryptocurrency via a straightforward method, and overcoming this, bitcoin exchanges came into existence. Since the user base of bitcoin is too broad, the new exchanges are coming rapidly. If you are interested in bitcoin trading, check how a beginner can buy bitcoin.
What is bitcoin
Bitcoin is not an existing currency physically, but it values because of the people’s beliefs. There is no intrinsic value; still, people show interest and believe in this currency as it is trading as domestic currency; otherwise, it has no price or value. When all the people worldwide would withdraw their money from bitcoin and stop believing it, it would become zero.
What are bitcoin exchanges, and why did they come into existence?
In the initial stage of bitcoin, there was only one wallet that we could use for transferring and receiving the bitcoin from one wallet to another, and only the person could share who had the bitcoins in his wallet. It means that you could not use the fiat currency or your bank account to buy the bitcoins on your own, and it was a prominent issue for the users.
So you know that where the problem exists, a business comes and that business, in this case, is bitcoin exchanges. The bitcoin users want to buy the bitcoin effortlessly through their bank account or any other online payment method. They want the perfect and easy user interface for a better experience and all the features in one platform that was impossible in the bitcoin wallet.
Few people decided to create a website and applicate that will facilitate all the things or solve all the issues bitcoin users are facing, and now we call it bitcoin exchanges. Bitcoin exchanges are registered under government regulations, and they have to report to the government like banks to make a legal company. The power goes into the hands of the owners because they have to share information with the government when required.
Why you should not use bitcoin exchanges
There are the following points that will help you to understand why you should not use these third-party bitcoin exchanges are given below:-
- Third-party control: The group of persons got the powers to manage and control the exchange because they developed the application or website, which means they also have an ability like the banking staff and manager. The banks do all the transactions, but people have to take their consent before doing anything with their money, and it is the same in the case of bitcoin exchanges.
- High charges: Various popular bitcoin exchanges charge very high fees for depositing money from an online payment method or withdrawing money to your bank account. Some exchanges charge for both depositing and withdrawing. You have to pay transactions to miners and the exchange for using their facilities, and it is not convenient.
- Tax regulation: Since third-party people control every bitcoin exchange, they have to register their firm or exchange under government regulation and pay taxes to the government. They are tracking all your transactions. The government can withdraw your transactions anytime and apply you a penalty if you are not reporting your profit as income or capital gain.
- No privacy: Every time you go to the new bitcoin exchange, you have to complete a formality that is account creation, and that is also okay, but the KYC is the actual game. You have to provide your identity documents so that they can track your transactions and activities in the crypto world. So they can also share your documents when required by the government.
- Security: Since the programmers develop the exchange application or website, security bugs may leak existing users’ information because every first product or service is not the perfect product or service. All the data and things are stored on one server, so hacking the application or website is possible.
- Not suitable for investment: if you are thinking about a long-period investment in bitcoin, you must not go with the exchanges because there is no future for exchanges whether they will exist in the future.
