How to select a cryptoexchange?
Crypto-exchanges is the third step to start trading crypto- currencies and tokens ( the first step is to read bout this topic and understand the risks and benefits and the second step is to open a software wallet or acquire a hardware- wallet to hold crypto- assets ).
In fact there are many articles stating that the future will be cashless, for instance, Sweden was one of the first European countries to embrace cash for payments in 1661 – may be the first European country that will be cashless, read more there.
the crypto currencies, are one of the assets from a broader classification : Crypto- assets, they could be used for a cheaper transfer and (sometime) faster transfer of funds, Santander is already using blockchain-based international money transfer of funds using Ripple’s XRP ( a cryptocurrency) , the service that was launched in april 2018, just after one month, or in 31 may, it is stated that Santander is using Ripple XRP based technology in 50% of international funds transfer.
Next: What is a cryptoexchange ?
it’s a services provider operating a website with or withour a phone app that let users to trade crypto-currencies
For end users that are interested to start buying cryptocurrencies, giving the fact they have already created a bitcoin or ethereum wallet, they have to select a crypto- exchange first to buy some crypto- currencies and transfer them to their wallet, you don’t have to hold (in jargon ‘hodl‘) all your crypto currencies in the exchange if you don’t plan to use all the funds for a trade or want to use them short-term to test.
so, the procedure is:
1) Create a bitcoin or ethereum wallet ( software or buy hardware wallet)
2) open an account in a crypto- exchange
3) transfer the funds to your wallet to keep them safe, left other funds you want to trade in the exchange.
So, here we go: there are 4 main types of crypto (crypto-asset) exchanges :
1) Centralized exchanges
2) Decentralized exchanges
3) Hybrid exchanges
4) OTC ( Off- exchange trading of crypto- currencies) with or without Broker–Dealer as facilitator.
Some Crypto- exchanges don’t allow you to use fiat money directly to buy crypto currencies, you have to buy them somewhere else then transfer to this exchange, it’s a common feature of the Decentralized exchanges.
Centralized Exchanges – they were the first to adapt the bitcoin and spread the word, the exchanges that started first got a huge advantage, Binance for example got more revenue compared to a major bank that was created 150 years ago.
they are providing the opportunity to trade fiat (USD, EUR..) with cryptocurrencies and trade between cryptocurrencies ( for example : between ethereum and bitcoin, or between bitcoin and bitcoin-cash)
Some examples of centralized exchanges:
Kraken.com is one of the oldest crypto-exchanges and was never been hacked.
Binance.com Binance exchnage is one of biggest in the world.
Bitmex.com (BitMEX Cryptocurrency Derivatives Trading Platform) that started operating in 2014 is enabling the trade BTC spot and futures, the platform have advanced trading features like Peer to Peer trade and Up to 1:100 leverage, all that with High BTC liquidity. it was stated that Ben DELO, the co-founder of BitMex is Britain’s youngest Billionaire
Decentralized exchanges are built directly on a blockchain, making hacking them harder, the major drawbacks are a longest execution time of a transaction and a graphical user interface ( gui) little bit difficult to use compared to more beautiful and user-friendly interfaces of centralized exchanges, some influencing figures in the crypto space are publicly against centralized crypto-exchanges, like Vitalik Buterin, also there are articles telling us that the future is promising for decentralized crypto- exchanges and they seem to be more resistant against hacking and may have less operating fees.
Some examples of decentralized exchanges (DEX’s):
IDEX , a decentralized exchange for trading Ethereum (ERC-20) tokens. IDEX combines the speed of centralization with the security of blockchain settlement- is developed by Aurora labs and is the main destination to list new tokens (ERC 20 tokens after the end of initial coin offerings)
Radar Relay – is decentralized exchange that allows you to trade Ethereum without the interference of middleman, you need MetaMask wallet for your browser with ETH to perform transactions on that exchange.
Hybrid Crypto exchanges: is a mix of both types of exchanges as stated by these emerging types of exchanges that are trying to find their way in the market.
example of a hybrid cryptoexchange :
Joyso is the new hybrid exchange operating form Taiwan, it is stated from their website, that Joyso offers the speed of a centralized platform while providing the security and privacy of a decentralized exchange, and they are actually running a promotion, that will let you win prizes with a total value of 20000 USD !
OTC ( Over the counter , also named ‘Off- exchange’ trading of crypto- currencies ) is done between two parties without an exchange in between, it could be executed via a broker-dealer or not, this is done in general by known parties if they trust each other or if they trust the platform that is built to provide such services. Some exchanges and banks are enabling the use of OTC like Baanx that recently launched an OTC exchange.
Broker-Dealer based trade of crypto currencies.
This is the most suited solution if you are willing to buy sell amounts from 50k to several millions at a better price than on exchanges and with a professional trading desk. Professionals such as Asset Managers, Private Banks, Ultra High Net Worth, Family Offices and more recently large ICO companies trade with a broker-dealer. Keep in mind that some broker-dealer may register at the SEC if they trade security tokens , read more here.
Broker-Dealer providing OTC example:
The French- based Cryptocurrency Liquidity Provider, Woorton was co-founded by Charlie MERAUD , Zahreddine TOUAG and Karim SABBA. Backed by french institutional investors, Woorton provides access to a wide range of cryptoassets by dealing with multiple trusted partners and by showing better prices than most trading platforms out there.
Their volume and proprietary algorithms allow them to arbitrage multiple order books and to get better prices with fast execution and a high level of liquidity. For more information : www.woorton.com or [email protected].
Broker-Dealer providing OTC example:
Woorton, the French- based Cryptocurrency Liquidity Provider Co-founded by Charlie MERAUD , Zahreddine TOUAG and Karim SABBA , you can contact them to ask for more information regarding your needs.
Which type of cryptoexchange to select ?
in short it depend : if you want to start do deal with crypto-currencies quick – go for centralized exchanges, but if you want a more ‘pro-active’ approach it depend on :
- The security level
- What amount of investments you want to risk to acquire crypto-currencies
- How much time you want to invest in crypto-currencies
So, for an increased security and if you are a wealthy person ( or a family office representative, manager etc) and want to diversify your investments you may select a Broker-dealer (less time invested, you will concentrate on your daily duties)
If you are a tech-savvy wealthy person with experience in trading you may try the OFF exchange, or you may select one of the decentralized or centralized exchanges.
of course there are other factors, the most important of them is the ‘trading volume‘ or liquidity, because an exchange that have enough volume will be less volatile and relatively less sensitive to manipulations, exchanges with lower volume are fragile and prices may differs ( more than average market prices).
the fees are charged :there maybe deposit fees, transaction and withdrawal fees ( plus banking fees) without forgetting the deposit and other transaction limits.
Contact us if you have any questions or you want to list your exchange in the list or if you found any errors.
Disclosure: we are not encouraging trading cryptocurrencies and tokens because they have a high volatility risk and are unpredictable, you have to take your time to understand this or ask help from broker- dealers (that will save you time and may save you money) or registered traders with experience trading cryptoassets.
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