Last week, Bob heard about DeFi for the first time. He has been studying up and down in all directions since then, and he is having a hard time focusing on his actual tasks. Who cares about selling used cars downtown, when all he can think of is Lamborghinis and his money enjoying a fantastic interest? But, things haven't been as easy as he imagined.
During his DeFi research, Bob discovered some exchanges with a fantastic interest rate on his investments, and he would even enjoy interest simply for keeping his cryptos at the exchange. He almost transfered all his investments to this exchange, but he once saw this text "DYOR" and after search the Internet, he discovered that it means; Do Your Own Research. So, before Bob moves on, he decides to do his own reserach. It is probably wiser to spend a couple of hours more before investing and transfering your funds, than to be sorry some hours later that you didn't behave wisely!
What is required from a good exchange?
First of all, what is Bob expecting from a good exchange? He wants it to be easy to use and to have low fees. Of course, if they have good investment opportunities as well, that only comes as a great bonus! Based on this, almost all exchanges should do a fairly good job nowadays. But, Bob decides to see what other people have written about the definition of a good exchange. Suddenly he discovers some words that he hadn't though much about earlier:
- Cold storage
- Country of registration
- Deposit and withdrawal fees
- Fund insurance (if someone should hack the exchange)
- Support (how fast are they at helping)
- General reputation online
- The team behind it
A few minutes ago, Bob thought it would be easy, but suddenly he has this big list of things he should investigate before transfering his funds. He decides to start with the last! Who has created the exchange? Why is that important? Well, if you know who is behind it, you will also know that this is a person that will do everything in his power to make sure the exhcange works well. If there is a team, you have someone to shoot at in case of trouble! An exchange that you know nothing about will be much harder to trust and track in case of trouble. Based on this information, he is very impressed by Binance and its founder who is extremely active on Twitter, and whom one of his friends even met last year during a Blockchain conference in Asia.
Bob also likes the sound of Bittrex, simply because it is registered in the USA, which again means that it has to meet lots of requirements not required elsewhere.
During his hours of research, Bob discovered that Steem is a platform packed with cryptorelated material! And that is also where he noticed articles giving praise to both Bittrex and Binance for quick help on support issues, something that cannot be said about many other exchanges out there.
What about the deposit and withdrawal fees?
Bob has registered users on 10 different exchanges by now. There are so many passwords and 2FA codes to pay attention to, that he had to register with a password manager to take care of it all. But, as he has been looking around at the exchanges, there is one major difference that he has noticed. Some exchanges will make you pay more than 10 USD for making a withdrawal in certain cryptos, while others will let you do the same for much less. And even more, the worst exchanges (the way he sees it) will even make you pay for depositing. In other words, if he would deposit 100 USD to an exchange, by the time it arrives, it will not be that much.
How is that even possible? Bob feels as if the cryptoworld is packed with gangsters. Luckily, not everyone are gansgers, but some of them seem to be.
The general reputation
After selling a used Lada before lunch. It looked like a wreck, and Bob couldn't understand why the buyer wanted it. Probably a luntic of some kid. But, Bob quickly forgets about the Lada and the lunatic, because he wants to go online to check the average reputation of some of the exchanges he has been looking into.
This is a nightmare - Every single exchange he wants to use has received bad reviews online. But, to his great surprise, he has also noticed that the same reviews can be found everywhere online. What does it mean? Bob comes to think of an incident that took place last summer. He wanted to buy an ice cream by the Adriatic sea. It looked delicious, but when he started to eat it, the taste was like fish!! Bob was furious! Instead of asking for a new ice cream, he told every single person he met in the next 5 days about his terrible experience. He even visited TripAdvisor to write a review, and he wrote a Google review, and even managed to find some other review sites not used by any other than him.
"That's how it works with the exchanges as well, isn't it?" When someone is experiencing something that is bad, they spread it everywhere, and thus, you will find the same complaints in many places.
Bob decides to target the subject from a different perspective! Which exchange seems to have a lot of happy users? He discovers a competition on Steem where people write about their favorite exchanges, and Binance seems to show up over and over again. Not just because of transparancy and their visible founder, but also because they give to charity, they use cold-storage to secure funds, they have low fees, they have a good support team (fast to answer), and they also come with lots of investment opportunities that sounds really nice to Bob!
Considering that he cannot find all his favorite cryptocurrencies on Binance, he decides to register for Bittrex as well. But, it isn't only because of the trading pairs, but also because he likes the principle of not putting all his eggs in the same basket!
Bob still cannot concentrate!
Bob is happy... he is satisfied with his decisions, and he is ready to transfer his funds. But, even though he thought he would get peace at mind after this, he just feels like investing more and more. After all, the opportunities are endless, and the investment possibilities are amazing...
What a life! :)