Multi coin pairing in cryptocurrency
What is multi coin pairing in cryptocurrency? We are going to take a closer look at this to help you understand in the simplest way.
Pairing coins can be best described as two currencies that are being traded against another. You can trade Fiat currency which is your Canadian dollar with Bitcoin or you can trade cryptocurrency with other digital currency.
Normally an exchange will have multiple coins available for paring. You can pick what currencies you would like to trade by using the currencies you have available. For example ETH/BTC- This shows Bitcoin being bought with Ethereum
Trading pairs works by comparing the cost of one cryptocurrency for another. This is basically establishing value in an asset. Think about it this way; When you go to the corner store to purchase an item, you can see the value of the item by the price that’s displayed. Cryptocurrency is the same thing! – Yes its that simple.
The difference with this example is that you would only use one currency (fiat) to purchase that item but on an exchange, you are using multiple cryptocurrencies.
When trading on the exchange you have to have a “base trading pair” In almost all cases the base trading pair is BTC (Bitcoin)
Here is another example to help you understand….
Roger looks in his wallet and sees he has a certain amount of BTC (Bitcoin) and he wants to purchase ETH (Ethereum). He would log on to the exchange and from the list he would choose ETH/BTC as a trading pair. The exchange will then generate the current values of each BTC and ETH to see what the value of ETH is compared to BTC. Roger will see the values and will have to make a decision to buy or cancel the order. If he buys, he will submit the trade to sell off some of his BTC for ETH.
This transaction was simple because Roger was trading using a “base pair” in BTC. If Roger would like to trade to another currency that is not a “trading pair” on his exchange, he would have to trade for a “trading pair” first.
Say he had Litecoin and he wanted to buy Ethereum, he would have to trade LTC/BTC to obtain some Bitcoin and then trade for ETH/BTC. Always remember that if an asset is listed on your exchange, it doesn’t always mean you can trade for it directly.
Think about it this way; When you go out of the country, you have to buy the currency of the land you are visiting. They may not accept Canadian currency but USD which is commonly accepted worldwide could be accepted and is the base pair.
Multi coin pairing is important when buying or selling cryptocurrency, you dont want to loose your hard earned money so make sure you understand which pairs are accepted before buying or selling.
Cryptocurrency is easy to understand If you compare it to the everyday world.