Bitcoin and Cryptocurrency Technologies

If you make a transaction that doesn't meet the fee requirements it will probably find its way into the
block chain anyway, but the way to get your transaction recorded more quickly and more reliably is to
pay the standard fee, and that's why most wallet software and most payment services include the
standard fee structure in the payments that go on, and so you'll see a little bit of money raked off for
transaction fees when you engage in everyday Bitcoin business.
4.7 Currency Exchange Markets
By currency exchange we mean trading bitcoins against fiat currency like dollars and euros. We've
talked earlier about services that let you do this, but now we want to look at this as a market — its
size, extent, how it operates, and a little bit about the economics of this market.
The first thing to understand is that it operates in many ways like the market between two fiat
currencies such as dollars and euros. The price will fluctuate back and forth depending on how badly
people want to buy euros versus how badly people want to buy dollars on a particular day. In the
Bitcoin world there are sites like bitcoincharts.com that show the exchange rate with various fiat
currencies on a number of different exchanges.
As you’ll see if you explore the site, there’s a lot of trading going on, and the prices move in real time
as trades are made. It’s a liquid market and there are plenty of places that you can go to to buy or sell
bitcoins. In March 2015 the volume on Bitfinex, the largest Bitcoin — USD exchange, was about
70,000 bitcoins or about 21 million dollars over a 24 hour period.
Another option is to meet people to trade bitcoins in real life. There are sites that help you do this. On
localbitcoins.com, for example, you can specify your location and that you wish to buy bitcoins with
cash. You’ll get a bunch of results of people who at the time of your search are willing to sell bitcoins
at that location, and in each case it tells you what price and how many bitcoins they’re offering. You
can then contact any of them and arrange to meet at a coffee shop or in a park or wherever, give
them dollars and receive bitcoins in exchange. For small transactions, it may be sufficient to wait for
one or two confirmations on the block chain.
Finally, in some places there are regular meet-ups where people go to trade bitcoins, and so you can
go to a certain park or street corner or cafe at a scheduled day and time and there will be a bunch of
people wanting to buy or sell bitcoins and you can do business with them. One reason someone might
prefer obtaining bitcoins in person over doing so online is that it’s anonymous, to the extent that a
transaction in a public place can be considered anonymous. On the other hand, opening an account
with an exchange generally requires providing government-issued ID due to banking regulation. We’ll
discuss this in more detail in Chapter 7.
Supply and demand.​Like any market, the Bitcoin exchange market matches buyers who want to do
one thing with sellers that are willing to do the opposite thing. It's a relatively large market — millions
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