Before Bitcoin markets flourished, obtaining Bitcoin involved only two methods: mining directly or finding someone willing to transfer Bitcoin via over-the-counter (OTC) trading.
Users could generate a Bitcoin wallet on bitcoin.org or through free services provided by wallet providers. For mining, simply input your wallet "address" into mining software to receive Bitcoin. For OTC trades, share your address with the counterparty to receive transfers—no bank codes, country codes, or identity verification required. This peer-to-peer model epitomizes Bitcoin’s decentralized nature. However, fiat-to-Bitcoin trades with strangers often require trusted payment platforms or in-person meetings, making OTC less convenient for most users today.
Centralized Bitcoin Exchanges: Key Features
Cryptocurrency investing is now simpler than buying stocks. Here’s what you need to know about exchanges:
In July 2010, Mt. Gox became the first USD/BTC exchange, pioneering the custodial model: users deposited USD, and the platform managed Bitcoin balances without requiring separate wallets. While this sacrifices decentralization, it offers convenience. Modern exchanges like Binance, Coinbase, and FTX follow this model.
Core Features:
- Custodial Management: Exchanges hold users’ crypto assets, eliminating private key responsibility.
- Liquidity Pools: Deep order books enable seamless trading.
- Fiat Gateways: Many support direct bank transfers (e.g., USD, EUR).
Q1: Local vs. Global Exchanges – Which to Choose?
Most Taiwanese investors use two exchanges:
- Local Exchanges (e.g., MAX, BitoPro): Link to Taiwanese bank accounts for TWD deposits.
- Global Exchanges (e.g., Binance, FTX): Offer advanced features but lack TWD support. Users often buy USDT (a USD-pegged stablecoin) locally, then transfer to global platforms.
👉 Compare top exchanges for low fees
Q2: How Does Order Book Matching Work?
Exchanges function like stock markets, with order books where buyers/sellers place bids/asks. Key terms:
- Maker: Adds liquidity (e.g., limit orders). Fees: ~0.05–0.1%.
- Taker: Removes liquidity (e.g., market orders). Fees: ~0.1–0.2%.
- Exchange Tokens (e.g., BNB): Offer fee discounts when used for trades.
Q3: What Is Crypto Custody?
Exchange accounts provide deposit/withdrawal addresses but not private keys. This means:
- Pros: Easy trading; no key management.
- Cons: Funds are controlled by the exchange (risk if hacked).
- Wallets (non-custodial): Users own private keys, enabling full asset control.
FAQs
Q: Are Bitcoin profits taxable?
A: Tax rules vary by country. Some (e.g., US) treat crypto as property, taxing capital gains.
Q: How secure are exchanges?
A: Reputable platforms use cold storage, 2FA, and audits. Always enable security features.
Q: Can I trade anonymously?
A: Most exchanges require KYC. For privacy, use decentralized exchanges (DEXs).
👉 Start trading with a secure platform
Key Takeaways
- Choose exchanges based on liquidity, fees, and local currency support.
- Understand custody risks: Self-custody wallets vs. exchange convenience.
- Optimize costs: Use exchange tokens for fee discounts.
For deeper insights, explore blockchain analytics tools or consult tax professionals.
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