<p>Exchanges interact with the Bitcoin network, and the blockchain, whenever people deposit on them, or withdraw BTC from them.</p>
<p>You can think of exchanges as services which are effectively like a bank account for multiple currencies. For example, they may offer a USD account and a BTC account. And they let you:</p>
<ul>
<li>Deposit or withdraw USD (using wire transfers or other means of sending fiat)</li>
<li>Deposit or withdraw BTC (using Bitcoin transactions, <strong>on the blockchain</strong>, or possibly using Lightning)</li>
<li>Sell BTC (which decreases your BTC account, but increases your USD account correspondingly)</li>
<li>Buy BTC (which increases your BTC account, but decreases your USD account correspondingly).</li>
</ul>
<p>Only the second of these actions involves any interaction with the Bitcoin network. The exchange operates a large Bitcoin wallet which holds all the funds of all its customers' BTC accounts, plus a database that remembers how much of it belongs to every customer (their account value). So this explains why trades don't incur on-chain transactions: they don't affect the exchange's wallet, only the database entries.</p>

CC BY-SA 4.0
2021-09-28T11:26:47.983Z
2021-09-28T13:56:45.263Z
2021-09-28T13:56:45.263Z
Pieter Wuille
<p>According to <a href="https://bitcoin.stackexchange.com/questions/66145/high-activity-on-exchanges-vs-low-transaction-rate-on-blockchain">this answer</a>, since the transaction on exchanges are internal, the transaction on blockchain is irrelated to them.</p>
<p>But is the transaction on exchanges that trade bitcoins really not connected to blockchain in any way? Wouldn't the exchanges need to interact with the blockchain at some point?</p>

<transactions><blockchain><exchanges>
How is transaction on exchanges that trade bitcoins connected to blockchain?
Aqqqq
# How is transaction on exchanges that trade bitcoins connected to blockchain?

(Asked by: username_0 on 2021-09-28)

According to [this answer](https://bitcoin.stackexchange.com/questions/66145/high-activity-on-exchanges-vs-low-transaction-rate-on-blockchain), since the transaction on exchanges are internal, the transaction on blockchain is irrelated to them.

But is the transaction on exchanges that trade bitcoins really not connected to blockchain in any way? Wouldn't the exchanges need to interact with the blockchain at some point?

**Tags:** transactions, blockchain, exchanges


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## 1 answers

### Answer by username_1 on 2021-09-28. Score: 3 | Accepted answer

Exchanges interact with the Bitcoin network, and the blockchain, whenever people deposit on them, or withdraw BTC from them.

You can think of exchanges as services which are effectively like a bank account for multiple currencies. For example, they may offer a USD account and a BTC account. And they let you:

* Deposit or withdraw USD (using wire transfers or other means of sending fiat)
* Deposit or withdraw BTC (using Bitcoin transactions, **on the blockchain**, or possibly using Lightning)
* Sell BTC (which decreases your BTC account, but increases your USD account correspondingly)
* Buy BTC (which increases your BTC account, but decreases your USD account correspondingly).

Only the second of these actions involves any interaction with the Bitcoin network. The exchange operates a large Bitcoin wallet which holds all the funds of all its customers' BTC accounts, plus a database that remembers how much of it belongs to every customer (their account value). So this explains why trades don't incur on-chain transactions: they don't affect the exchange's wallet, only the database entries.


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