"Instant exchanges, what's up with that?", is a question I've been asked by many colleagues after I was once again rambling about blockchain, cryptocurrencies, instant exchanges and payouts. I'm sure we've all heard more than enough about cryptocurrencies by now and how new ones get created by the day. However, unlike "standard" money that you can easily trade by visiting your local bank, cryptocurrencies are traded in online exchanges, some of them are instant exchanges (in example flyp.me) but some of them are not. But what exactly is the difference?
To really see the difference one must have a look at the key parts of both worlds. In this case, the old Latin proverb "Nomen est omen" really does come true as one of the defining features of instant exchanges is their ability to provide instant services. There is no order book, which means that you don't have to wait for someone to buy your coins or to sell you theirs. This works because you buy directly from the instant exchange itself. Being able to directly trade with the exchange has the large benefit that there will be substantial amounts of funds for each coin, meaning that there won't be any shortage, high price fluctuations or problems getting rid of your coins. You directly sell at market value at the time of your trade, whenever you want.
Standard exchanges, however, require you to create an account where you can create an order in the order book. Your funds will be "locked" until the previously specified rate comes true and the order gets automatically processed. In contrast to the instant exchange, however, this requires that there is actually someone on the other side of the order book, willing to buy your coins at the same price you're selling them. This can result in supply and demand holes, especially on marketplaces with very low trading volume.
Another extreme difference is the way you actually exchange money. In the case of an instant exchange, you have complete control over your funds and send the specific amount you want to trade at the moment of your trade. Right after processing the order (which is instant and only depends on network confirmation times) the traded funds will be sent back to your wallet. Standard exchanges, however, require that you load up your account and only trade virtual coins. During this whole process, the exchange itself retains complete control over your money. To get your money back you have to withdraw it from your account to your private wallet, often times incurring some withdrawal fees.
Speaking of fees, exchanges tend to have withdrawal fees, sometimes deposit fees, and often times a small fee on the rate. However, because the trading happens only internally and completely off-chain, there are no transaction fees, contrary to instant exchanges where you accumulate TX fees with every trade. But depending on the exchange you might not really find any information about the amount, leading to massive surprise fees after the fact. This, however, can not happen on instant exchanges as you can clearly see the amount you will get back for the amount you trade in.
To sum everything up, here is a short comparison:
| Instant exchange | "standard" Exchange | |
|---|---|---|
| Instantaneous | + | |
| Transparent Fees | + | |
| Control over your funds | + | |
| No accounts required | + | |
| Privacy | + | |
| Instant | + | |
| Automated orders (orderbook) | + | |
| Easy to understand | + | |
| No transaction Fees | + |
Some Examples
To help get you started, here are some Instant and non-instant exchanges I have personally used in the past.
| Instant exchange | "standard" Exchange |
|---|---|
| Flyp.me | Hitbtc.com |
| Shapeshift.io | Binance.com |
| changelly.com | Bitfinex.com |
Disclaimer
I am in no way a professional and this should not be considered financial advice. Do the proper research before investing.
The sponsor of this article requested completely "unbiased, reasoned and independent" content which I try my best to provide. In case there are any mistakes or wrong assumptions, please let me know so I can correct them.