Crypto Exchange vs Crypto Broker: What Is the Difference?

There are so many terms used in the crypto world that tend to be confused to mean the same thing, while they do not. A good number of crypto users assume that a broker and an exchange are the same. In the same line, brokers and exchanges are often confused with other types of exchange platforms such as P2P or OTC platforms.

But what is a Crypto Broker? What is an Exchange in the crypto world? Are they the same thing? If not, how do they differ and which one should you use in your quest to acquire your favorite token?

What Is A Crypto Broker?
A broker is an individual or a company that facilitates the buying and selling of financial assets for a commission. Brokers can be compared to shops in real life, they are in the middle of the transaction which means that you will have to buy from them at higher prices but they'll save you the hassle of finding a buyer.

A Crypto broker is no different, they are simply companies that allow you to buy and sell cryptocurrencies for fees. Many traditional brokers have made their way into this space as they see an opportunity to make money through commissions on exchanges.

After all this explanation about what is a broker, how do they differ from exchanges?

What Is An Exchange?
An exchange is simply the meeting point of the buyers and sellers where transactions are carried out. Since crypto-assets are completely digitalized, every transaction that happens on the blockchain needs to be verified. This is the role of an exchange, to ensure that every transaction that happens on their platform is authentic. In addition to verifying transactions, exchanges also bring liquidity to a market since they allow traders from all over the world to meet and interact with each other.

This interaction results in better prices, as the offer and demand are matched. These matches happen because of the order books which are basically lists of all current buy and sell orders on an exchange. Our detailed BitQT review shows how exchanges work.

Key Differences Between Exchanges and Brokerages

Transaction Fees:
Exchanges have low fees since they make their money from transaction fees, as such, you will be charged a fee every time you want to withdraw funds (with some exemptions). A broker on the other hand will charge higher fees for buying and selling.

Payment Methods:
You can use several payment methods for trading with an exchange - bank transfers, credit cards, PayPal, and others. A Broker on the other hand will help you buy from them so they prefer for you to deposit funds with a card or a bank transfer.

Transparency:
Exchanges are transparent platforms that allow traders to see all market prices at any time while brokers do not have this transparency.

When To Use A Broker
A broker is perfect for those who want to acquire cryptocurrencies with fiat money (e.g USD, EUR). That means if you want to buy Bitcoin or Ethereum using USD, you will need to use a broker.

When To Use An Exchange
You can use exchanges for several reasons; if you are looking to trade cryptocurrencies then an exchange is your best bet. You can also use one if you plan on spending the cryptos that you acquire by selling them for fiat money (e.g USD).

Final Thoughts
As we have already mentioned, if you want to acquire cryptocurrencies with fiat money then a broker is your best bet. If you plan on trading and exchanging cryptocurrencies for other cryptocurrencies then an exchange is the correct platform for you.

Finally, as always, do your own research before committing to any investment, and don't forget to diversify your portfolio!