Last week, Bithumb lost nearly $20 million in cryptocurrencies due to a hack. This was the second time Bithumb, one of the largest exchanges in the world, was hacked in a 12-month period. Just a few months prior to this, QuadrigaCX, the leading exchange in Canada, lost access to its users’ funds as its founder and CEO, who was the only person with access to the exchange’s Crypto storage, suspiciously died on a foreign trip.
With the exchange's CEO being the only person with access to private keys, the exchange has been unable to return funds to users.
Given the growing problems faced by centralized exchanges, Switch.ag, a platform designed to enable users to anonymously switch Ethereum or any ERC-20 token for other ERC-20 tokens, gift cards, or charitable giving, has launched a DEX. SwitchDex, which allows users to trade ERC-20 tokens with Ethereum, has seen support among prominent people in the Crypto space, including John McAfee.
Fees Distributed to the Community
There’s a number of decentralized exchanges out there, but SwitchDex is the first one to receive support from major profiles in the Crypto space. For one, it’s the first decentralized marketplace which is friendly to novice entrants in the Crypto space. Switch.ag is designed to be easy to use by the masses as they are given a visual display of their trade matches. SwitchDex extends the ecosystem by giving more experienced traders the opportunity and freedom to carry out more flexible traders.
While the exchange’s goal of making a decentralized marketplace that can suit anyone’s needs has been well-received, the likely reason it has gained so much support is because of the way the exchange handles its fees.
Fees Distributed to Token Holders
Existing decentralized exchanges like DDEX and ForkDelta retain all their fees. Ironically, even centralized exchanges distribute fees back to token holders. For example, Binance gives back 20% in the form of buy-backs and Bibox shares 50% of fees with token holders.
SwitchDex is the first exchange to distribute all fees to token holders. Thus, this is the first decentralized exchange to hand back fees to the community, and it goes all the way since SwitchDex won’t retain any of the money. The fees are airdropped to wallets that hold ESH, the native token of Swtch.ag, and SDEX, the native token of SwitchDex.
Both centralized and decentralized exchanges tend to charge a fee to both market makers and market takers. Bitfinex, for example, charges a 0.2% fee to market takers and a 0.1% fee to market makers. Thus, the net claim adds up to 0.3%. Decentralized exchanges have followed this path:
IDEX: 0.2% for market takers; 0.1% for market makers (0.3% net claim)
DDEX: 0.3% for market takers; 0.1% for market makers (0.4% net claim)
ForkDelta: 0.3% for market takers (0.3% net claim)
SwitchDex, on the other hand, charges only one fee: 0.2% for market takers, and these fees are given back to the token holders anyways. Thus, the exchange offers a trader-centric platform as not only are the fees low, but they are also given back to the community.
Things get more interesting with memberships, as these can reduce fees to zero.
The concept of exchange memberships has been put to use in the past. Huobi, a leading centralized exchange, sells memberships for hundreds or even thousands of dollars. In return, members are given fee discounts. Huobi’s memberships are a great resource for large market players, but are unlikely to be used by retail traders and investors as the large upfront sum is not going to match fee savings.
SwitchDex, noticing the potential in memberships, has created the most powerful membership program in any exchange’s history. With a one-time payment, traders will become SwitchDex members, enabling them to trade for free on the platform forever. Even the membership fees are airdropped to platform token holders (ESH tokens and SDEX tokens).
The membership fees will start a $20 in April and will increase by $10 each month. Presently, the intent is to cap the maximum fee at $100 by December, 2019. The membership fees work as such:
April: One-time $20 fee.
May: One-time $30 fee.
June: One-time $40 fee.
December: One-time $100 fee.
A New Tier for a DEX
Decentralized exchanges have seen limited popularity to date but that’s been largely because centralized exchanges have either offered lower fees, partially returned fees to token holders, or offered memberships for fee discounts.
SwitchDex is the first decentralized exchange to offer features that can go horn-to-horn against any CEX. By offering just a taker fee, $20 memberships for a life-time of no fees, and returning all collected fees to ESH and SDEX holders, SwitchDex is kicking off a new tier for a DEX.
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