How does Exodus wallet (or other wallet) exchange bitcoin to other cryptocurrency?

Question

I have been using Exodus wallet for a very short time. And it shows that I can exchange bitcoin to many other cryptocurrencies and wise versa. I still couldn't find a good answer on how this exchange of currencies works and if there are any risks associated with it. Please excuse me if any of the questions don't make much sense to you.

If anyone knows about it, please help me to understand this process better?

• If I exchange bitcoin to litecoin/ethereum, does the wallet software itself
  send the request the buy order of litecoin/ethereum to some other exchange?

• If there is no litecoin/ethereum exchange in my country (Australia) what will happen in exchanging litecoin/ethereum back to bitcoin? I don't know whether it needs to have a litecoin/ethereum exchange in the country to do so...

• In case if I want to exchange litecoin/ethereum back to bitcoin, how does the Exodus wallet software handle it OR how does a wallet software generally handle it?

• Basically, what are the risks associated with the exchange between cryptocurrencies, other than their price going down?

Answer 1

If I exchange bitcoin to litecoin/ethereum, does the wallet software itself send the request the buy order of litecoin/ethereum to some other exchange?

Yes.

If there is no litecoin/ethereum exchange in my country (Australia) what will happen in exchanging litecoin/ethereum back to bitcoin? I don't know whether it needs to have a litecoin/ethereum exchange in the country to do so...

Cryptocurrencies are international. The wallet does not know nor does it care about where you are located. There is only one exchange the Exodus uses anyways: Shapeshift (it isn't really an exchange though).

In case if I want to exchange litecoin/ethereum back to bitcoin, how does the Exodus wallet software handle it OR how does a wallet software generally handle it?

It uses Shapeshift. It sends a request to Shapeshift, sends some of one coin to Shapeshift and Shapeshift sends you an equivalent value in the other coin.

Basically, what are the risks associated with the exchange between cryptocurrencies, other than their price going down?

Because you are only exchanging between cryptocurrencies, there are little to no risks (other than financial) as few or no countries are regulating cryptocurrency to cryptocurrency exchanges.