Fiat-to-Bitcoin exchange

[2stfn]

How do Fiat-to-Bitcoin exchanges (like Coinbase, Bitpanda or Binance Jersey) work from a technical POV? I can't find technical explanations of the transfer from USD funds to crypto anywhere.

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[NeuroticFish]

I can't find technical explanations of the transfer from USD funds to crypto anywhere.

I'm not sure what technical part is unclear. The "transfer" is probably done like for any currency transfer. You are asking like you would expect that for every 5700$ one Bitcoin is getting "printed" or something. That doesn't happen.

I don't know all the exchanges in the list, so I'll stay "generic".

There are individuals or companies that have mined Bitcoin, have bought Bitcoin in the past, have earned some for good or services... the proper exchanges only match the Bitcoin sellers with the ones that want to buy Bitcoin. If their prices match, the trade is made. If they don't, the orders are added to the list until they get matched or aborted.
Then the ones selling Bitcoin with withdraw the received USD and the the ones buying Bitcoin will transfer Bitcoin into their wallet.
Of course, the exchange gets a fee for its service.

There are also companies that buy/sell Bitcoin "right now". They have buffered some USD and Bitcoin for doing the trade now (and some at the exchange) and will actually trade (now or later) at a proper exchange. Of course, they add also their fee (and you also pay the "proper" exchange fee).

[traderethereum]

I think you need to explain more details about your question because it seems, I have difficulty to understand the point of your question.
Did you already search on Google about your question?
I cannot understand what you mean about the technical explanations of the transfer from USD funds to crypto is.
I hope that you can tell us.

[2stfn]

Let‘s say I wanted to create a Fiat to BTC exchange (app). If a customer places a buy order worth 500$ and the app/service itself does not have and BTC/liquidity (yet), does the exchange have to buy BTC from another exchange?

Then this infinite chain would apply in theory (which can‘t be the case): Exchange 1 buys BTC from exchange 2, and exchange 2 buys BTC from exchange 3, and so on.

[NeuroticFish]

Let‘s say I wanted to create a Fiat to BTC exchange (app). If a customer places a buy order worth 500$ and the app/service itself does not have and BTC/liquidity (yet), does the exchange have to buy BTC from another exchange?

Then this infinite chain would apply in theory (which can‘t be the case): Exchange 1 buys BTC from exchange 2, and exchange 2 buys BTC from exchange 3, and so on.

Nope. It's not infinite chain.
Some exchanges buy "from" other exchanges, as I explained. But the chain "stops" at the proper exchanges. There the trade is somebody against somebody. If one cannot buy at the desired price, the order will stay unfilled, until it's canceled (and the price adjusted) or the market fluctuations make that price valid again.

[joniboini]

Let‘s say I wanted to create a Fiat to BTC exchange (app). If a customer places a buy order worth 500$ and the app/service itself does not have and BTC/liquidity (yet), does the exchange have to buy BTC from another exchange?

They can use market makers or simply look for liquidity first. Some exchanges won't go that far and would leave the trade solely to their user. Which means, as long as there is nobody who wants to buy or sell then there's no trade (think it like a DEX).

As for your USD to crypto question, I believe you want to understand how does exchange credit their user balance when they deposit fiat and then buy crypto? If that's true, then it's actually simple. The exchange will provide a database which basically logs users fund activity, including when they decide to 'use' their deposited money to buy crypto. There's no transfer from fiat to blockchain anywhere.

[2stfn]

I really appreciate your answers, thank you.

So when let‘s say Coinbase started their business without liquidity (just for this thought) they received USD funds to their bank account and reached out to Mt. Gox or any other „real exchange“ to buy the ordered amount of crypto?

As a consequence users bought coins from Coinbase and paid higher fees just for simplicity reasons? Why doesn’t (or didn‘t) for example Binance allow Fiat deposits earlier?