In the increasingly turbulent world of cryptocurrency exchanges, many that have emerged in the wake of the great success of giants such as Binance, Coinbase, Kraken Huobi and Upbit, are certainly not very reliable, whether in terms of security, transparency or functionality.
Major crypto exchanges and security systems to prevent theft by hackers
According to a survey done in 2019 by market research agency Statista, 40% of traders of respondents saw security as the biggest problem with exchanges, 37% saw the cost of transaction fees as the main problem, and 36% cited a lack of liquidity.
On the security front, major exchanges have worked hard in recent years to avoid cases of multimillion-dollar thefts by professional hackers by adopting the 2 Factor Authentication (2FA) system to avoid or at least limit the increasingly frequent cases of account hacking.
With this system, a double key is used to authenticate a user’s access to the platform.
Related to security there is also the issue of customer service, in which Kraken certainly seems to be preferred compared to giants such as Coinbase and Binance, whose support services seem to be rather poor, considering the many negative comments recorded by an increasing number of users.
Another important factor is the liquidity of the exchanges, which represents the ease of converting a cryptocurrency into cash or another cryptocurrency.
This serves both as a guarantee for investors and to stabilize the fluctuations and volatility of the market. In this case, Binance, Coinbase, Huobi, KuCoin, Kraken and Bitfinex are certainly among the most liquid exchanges.
Which exchanges are the most convenient in terms of fees
One of the most important aspects of choosing an exchange is certainly the commissions paid per trade. A large part of Binance’s success is due to its commissions, which are among the lowest in the market.
There are three types of fees: on trading, on depositing or withdrawing cryptocurrencies and on funding or leveraging cryptocurrencies.
As far as trading fees are concerned, with 0.1%, Binance is definitely the cheapest exchange, with the possibility of a 25% discount if you use tokens from the BNB platform.
Poloniex has the lowest starting commission at 0.09%, but without the possibility of a discount, while Gemini and Coinbase with a commission between 0.9% and 1.9% are certainly among the least convenient exchanges from this point of view.
The commissions paid on Kraken, Bitfinex and Huobi average between 0.16 and 0.25%. As for the deposit, very few exchanges have a fee (Gemini is one of them), while on the withdrawal there are many that apply fees, which are variable depending on the cryptocurrency but on average are around 7/10 dollars.
The new frontier of cryptocurrency exchanges
Alongside centralized finance, decentralized finance is increasingly being used as an alternative to overcome security gaps.
Over the past year, there has been a real boom in the offering of decentralized finance products and projects, and as a result, the number of DeFi exchanges using the automated market maker system has multiplied.
In simple terms, these are autonomous trading mechanisms that eliminate the need for an intermediary as in traditional exchanges. In such platforms, orders to buy or sell assets are executed through smart contracts and the market is thus regulated by mathematical algorithms that adjust to the orders placed by the various operators in the market at that moment.
The leading exchange is undoubtedly Uniswap, which has recently been investigated by the US SEC for alleged irregularities involving a financial lending product.
Other exchanges such as Bisk, Pancake Swap or Sushi Swap are gaining a large share of a market, which is still very small compared to that of centralized finance, but which could certainly have more promising future developments.
Its popularity is still too low and it is difficult to access for those who do not already have some expertise in the crypto world for it to really compete with giants such as Coinbase and Binance.