Bitcoin Exchanges

Bitcoin exchanges are businesses that match buyers and sellers of bitcoin. Most operate spot markets where users can trade bitcoin for fiat currency or other digital assets. Some also offer margin, futures, or other products. Exchanges are the most common way new participants acquire their first bitcoin. They are not part of the Bitcoin protocol. They are private companies that interact with the network.

When bitcoin is left on an exchange, the exchange controls the private keys. The user holds a claim against the exchange rather than direct control of the asset on the blockchain. This introduces counterparty risk. Exchanges can be hacked, frozen by regulators, or fail operationally. Many participants use exchanges only for acquisition or sale, then withdraw bitcoin to a wallet they control. This practice reduces exposure to the exchange.

Exchanges do not set the consensus rules of Bitcoin. They cannot create new bitcoin outside the protocol’s issuance schedule. They also cannot prevent a user from withdrawing bitcoin to an address the user controls, provided the exchange is solvent and operational. Understanding the difference between holding bitcoin on an exchange and holding it in self-custody is a basic distinction for anyone using the network.