Hi all,
This is my first post. I've really appreciated the informative and helpful advice provided by this community over the past while; and figured this is the best place to ask a two-part technical question concerning currency exchange. Here goes:
Firstly:
How do exchanges (such as coinbase.com) convert crypto into actual, fiat currency?Do they:
- Have multiple bank accounts with USD, EUR, AUD balances in them which automatically transfer when someone cashes out?
- Have an internal conversion capability whereby BTC / Cryptocurrency goes to whatever currency the customer decides?
- Rely on a third-party themselves to convert BTC / Cryptocurrency and then automatically transfer it to the customer's account?
Secondly:
If I wanted to replicate this capability, how would I do it?(I'm asking this because I'm curious as to how they technically implement this function. For example; if they have multiple bank accounts which deposit into customer's accounts at cashout, how is this automated / approved / allowed?)
Thanks in advance and kind regards!
Most exchanges are only providing a platform to match people that want to buy with people who want to sell. It's simple as that.
They do it through an orderbook which everyone puts their bids and their asks. Asks being sell orders and bids being buy orders. The price you pay if you want to execute a market order is the best offer(at the top of the orderbook).
Coinbase is not an exchange, per se since they do not have an open orderbook. They are probably operating on a market maker model where if you want to sell you get minus percentages and if you want to buy you get plus percentages. This gives them profit. or they may have accounts in major exchanges to gain profit as well, yes. But that's private undisclosed info.
