Virtual currency brokers: the supervision on cryptocurrency platform (1)

In 2017, investors flooded into the cryptocurrency market, driving the price of cryptocurrency surging. This new investment is realized through platforms provided by cryptocurrency wallets and exchanges. These platforms are similar to virtual currency brokers, which are the carriers for many investors to hold and trade cryptocurrencies.

Cryptocurrencies are digital assets recorded on a decentralized public distributed ledger. The distributed ledger is called blockchain, which is used as a record of asset ownership and transfer. Owning a private key is a requirement for owning a cryptocurrency. When the private key matches the public blockchain, the owner can access its cryptocurrency and transfer it to someone else. When this process is being recorded on the blockchain, the transfer occurs. Since the blockchain is maintained through a decentralized process, the transactions recorded on the blockchain are irreversible, which can prevent the occurrence of "double consumption" or "transferring the same cryptocurrency twice." In addition, unlike other digital assets which can’t be converted into cash, cryptocurrency can be converted into legal tender.

The online cryptocurrency wallet is a service that can store and protect cryptocurrency on behalf of clients. The private key allows its owner to transfer his cryptocurrency, and the wallet providers hold the private key on behalf of their clients and act as their custodian. In fact, when clients hold cryptocurrency in an online wallet, they can’t access their private keys. Instead, they must trust the wallet provider who holds the cryptocurrency on their behalf.

Unlike wallets that only hold cryptocurrency, cryptocurrency exchanges can further provide a market where users can trade one cryptocurrency with another one or the currency issued by government. Both the types of currencies provided by these exchanges and the required costs vary. The costs typically include commissions for each transaction and withdrawal fees for transferring cryptocurrencies from exchanges. In addition, exchanges only trade between clients who have cryptocurrency wallets. In order to trade on the exchange, the client must hold cryptocurrency in the exchange's wallet.