Difference between cryptocurrency exchange and exchanger

Most of the cryptocurrencies are always sold and bought through cryptocurrency exchanges, but some part... why it is unprofitable to always use only one exchanger... high rates can turn into a "dirt" transfer... the availability of 2FA account protection along with storing deposits in "cold" wallets is an attribute of appropriate approach...

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Difference between cryptocurrency exchange and exchanger


What’s the difference between cryptocurrency exchange and cryptocurrency exchanger?

The bulk of trading operations with bitcoin and other cryptocurrencies are performed through the cryptocurrency exchange, but a portion of the cryptocurrency market is occupied by services of a fundamentally different type - internet exchangers. Much like exchanges these exchangers, offer exchanging selling and buying cryptocurrencies, sometimes as the main service, and sometimes - along with large-scale trading of fiat currencies or as a smaller addition to it.

There are fundamental differences between cryptocurrency exchanges and cryptocurrency exchangers which will be listed later. However, we will not postpone the consideration of the most important difference: while contacting the exchanger you conduct trading operations precisely with it, at the cryptocurrency exchange you sell cryptocurrencies and buy them not from the exchange (which only provides a trading marketplace) but by dealing with private owners of cryptocurrency and fiat assets. This makes the cryptocurrency market existing at cryptocurrency exchanges though not completely independent of the will of individuals, but still more democratic than the trading held by the exchangers.

Let's consider in more detail the most important differences between the cryptocurrency exchanges and the cryptocurrency exchangers.

Cryptocurrency exchanges are more reliable

Cryptocurrency exchanges which have been operating at the market for several years now and enjoy a well-deserved reputation among professionals, plus are definitely more reliable for buying and selling cryptocurrencies than most cryptocurrency exchangers.

The difference in the potential reliability is most noticeable if we compare the exchanges with their long history and exchangers that appeared just a couple of weeks ago. The fact of exchanger dishonesty may not be revealed in a relatively short period of its "length of service", so when exchanging with relatively new exchangers, you can easily get into the list of the first victims of their fraudulent activities.

Hereinafter we will see why it will not be a cost-effective decision to rely on one particular exchanger each time (if you in general would like to use exchangers for operations with cryptocurrency). If, however, each time you want to look for an exchanger with the best exchange rate for each new exchange activity in this direction, then most likely you will not have enough time and patience to carefully study the feedback on all new and new exchangers, price offers of which will be the best ones - and the probability of fraud or the occurrence of difficulties will be significantly higher than when using one or more trusted exchanges.

Financial differences

Out of all the differences between the cryptocurrency exchange and the cryptocurrency exchangers, the most obvious differences are financial ones. One can first identify the price and then other financial differences in descending order of priority.

Prices at exchanges and exchangers are significantly different

The sales prices of cryptocurrency assets for the clients in the exchangers usually exceed those at the exchanges. If you compare, for example, the amount in YaM, which should be placed to EXMO to buy a bitcoin, and the expenses, in the same currency, for the purchase of one BTC in the exchange Internet service at the optimal rate, then, as a rule, buying a bitcoin at the exchanger will be unprofitable, at least by 1-2% (in case of rapid increase in the price there may be a difference of 3% and 5%). The situation will be similar when selling a bitcoin, and, in this respect, the difference in the cost of bitcoin is increased during intense market ranges, especially during its growth.

In general, the distinctive feature of the exchangers’ price policy is characterized in this way - they do their business, on one hand, by buying bitcoin at high rates, and on the other hand - by selling it at very high rates. It should be noted that the exchangers set a really good rate when they buy bitcoin from clients (the competition between them in this case is the strongest), but if you look at prices of less popular cryptocurrencies, then quite often they give an average price for them at the best of times, but they agree to sell them only at high rates.

If you look broadly, it may seem that once the prices in the exchange services are higher, it is better to sell your BTC there rather than at the exchange. In fact, this option does not have to be better. Why?

A) Firstly, you should not run your head against the fees like a wall with which the exchanges are ready to withdraw your funds to the payment systems you have chosen. Yes, it may seem that it is very unprofitable to sell bitcoin at the exchange at the rate of RUB 130,000 and then to order the payoff to your QIWI excluding 3% of fees, while the exchangers offer a price of about QIWI RUB 130,000 without extra fees. However, in effect, sufficiently developed exchanges have the possibility of fee-free transfer of funds from your balance to special codes (for example, EX-CODE), the currency and denomination of which you determine when creating them. These codes are intended for transfer of balance assets outside of exchange trades, for example, for selling in those exchangers that have established partnership relations with this exchange market, and often most favourably buy its codes.

If we come back to our example, we will see that 130,000 rubles from the EXMO exchange balance can be withdrawn to QIWI through a regular withdrawal excluding 3%, and at the same time, you can sell codes for this amount for the same QIWI including up to 3% (and more), in one of the exchangers accredited by the exchange; due to this, the profit will make up 130,000 * 1.03 – 130,000 * 0.97 = 7,800 rubles from each bitcoin sold.

B) Secondly, the withdrawal of many types of cryptocurrencies to exchangers (either from the exchange balance, or from the wallet of a different type) is expensive, for example, for bitcoins, the recommended fee can be as low as 0.001BTC, and more (especially critical for those who collect satoshi at bitcoin faucets). In addition, even having relatively high fee, transactions are sometimes "stuck" during the transfer.

At the same time, if the miner adjusts payoffs from the pool to one’s wallet, he/she will not have to worry about the transactions and their price during the selling of credited cryptocurrencies at the exchange, because during such a sale there won’t be any need to pay the fee for the transaction - it will be necessary to pay only the regular exchange fee (in most cases, about 0.2% of the transaction amount). This is due to the fact that the cryptocurrencies sold at the exchange are transferred to the new owner without the performance of the cryptocurrency transaction in its usual sense - the ownership over the cryptocurrencies is changed, the storage concern of which was previously taken up by the exchanger.

C) As noted above, the reliability and honesty of well-reputed exchanges is obviously higher than that of exchangers willing to buy your cryptocurrency at a very high price. Moreover, experience has shown that exchangers with particularly high prices can often start up unfair manifests (for example, not mentioning extra fees when filing an application), transfer "dirty" electronic currencies to clients (we will explain this point below), or commit fraudulent activities directly. Professionals note that the characteristic feature of the scam-exchanger is the overestimated price of buying bitcoins from clients (more or less typical is the overestimation of the price by 15-30% above the market rate of bitcoin).

Other financial distinctions

1) When selling cryptocurrency at the exchange for fiat money, this money will first appear in the account of your exchange user account, where they can be withdrawn to one or another payment system. Usually exchanges provide a fairly wide range of withdrawal methods. For example, EXMO can access PayPal, YaM, QIWI, Webmoney, Payeer and many other EPSs, as well as payments to Visa / MC plastic cards or transfer to a bank account.

When selling cryptocurrency in the exchanger, you directly get the e-currency required for them. At first glance, it's easier to receive money, but here, apart from the unfavourable rate, two more problems may occur - firstly, the currency you need at an acceptable exchange rate may not be present in any exchanger, and secondly, if you exchange bitcoin for fiat at the service center that operates with doubtful cash, they may transfer you "dirty" money (the problem is especially relevant when exchanging cryptocurrency for QIWI). The consequence of the "dirty funds" receipt on your, say, QIWI wallet, may be the blocking of the wallet by the EPS security service, and more serious troubles up to the prosecution by the law, if you are suspected in laundering of illegally received income.

It is possible to avoid the risk of receiving "dirty" money, but for this you need to sell cryptocurrencies either at a legal exchange with an impeccable reputation, such as EXMO or in accredited exchangers which have never been caught in transactions with doubtful funds for many years.

2) In order to choose the exchanger that offers the best rate at the moment, the user has to possess certain skills and an obligatory habit of checking the exchanger monitoring service (or, better, several monitoring services). The fact is that although the selling and buying prices of the cryptocurrency in a particular exchanger have stock exchange rates at its core, the final price is determined by a certain surcharge, which is set by the owner of the exchanger and which varies in each exchanger after some time (during the day inclusively). Hereof it follows that the exchanger, which is now the best in the exchange rate in some direction, can "slip" into the middle of the price list in a day or two or even in half an hour, and if you will unknowingly use it again and again, you will lose a significant amount of money (needless to say that at the best exchanger at the moment the rates may be worse than the exchange ones).

Even following strictly the above conditions, you will have to deal with new and new exchangers and study their interface each time; in addition, as we’ve already noted, when meeting with each new exchanger, it will be necessary to pay attention to feedback of its work.

Note that the search for cryptocurrency exchangers not through the monitoring but through the search systems greatly increases your chances of losing your money completely by trusting scammers, including those masquerading under sites known to you (the problem of exchangers-clones imitating honoured service centres in design and name remains extremely relevant).

Thus, for newcomers in buying and selling cryptocurrencies, the use of a reliable cryptocurrency exchange placed in the browser bookmarks will be a simple, reliable and profitable alternative to the use of exchangers.

3) The so-called spread (the difference between the best selling price of a specific asset and the best price of its buying) for the exchangers usually makes up a few percent when buying bitcoin and selling it, and even more when dealing with altcoins. By the standards of more or less significant exchanges, such spread is super-high: for such exchanges, a spread in fractions of one percent for bitcoin and a little more for the main altcoins is typical (and if the spread temporarily grows as a result of sudden activities, then the players quickly reduce it to the previous figures).

Why high spread is bad in the case of exchangers? If, after buying a currency in the exchanger, you want to return it for some reason or another, the only possibility to do so will be by a few percent cheaper, and this is provided that the asset does not fall in value itself in the past time.

4) In the exchanger you can hardly persuade the operator to slightly make the price better for you. At the same time, at the exchange, you can both make a deal against one of the orders issued earlier by other participants (the deal will be concluded immediately, but the price may not be the best), and fix your price and wait until there are people willing to redeem your order. The profit, in the latter case, can make up from 0.5-1% to 3-5% or more (on low-activity exchange pairs). However, for the impatient ones this way is not very suitable, besides there is a risk that the price will "run away" towards the unwanted side before your order is completely redeemed.

5) Finally, if you need to buy some rare cryptocurrency, or use the exchange direction which is not typical, for example, Capitalist USD for DOGE, then it is very likely that no exchanger will offer you such an exchange, or they will ask for a high fee. If you come to the exchange market, where you can place the currency of Capitalist USD, then after placing it you can easily buy different cryptocurrencies for the funds from your balance.

A separate problem is connected with the electronic currency of Yandex.Money (YaM). According to the rules of Yandex.Money, the exchanger must temporarily freeze transactions when purchasing this currency from clients, if the payment from the YaM account used for payment of the application has been received for the first time (the freezing usually occurs for a period of 48 hours). Only after 48 hours the application is paid by the exchanger, and sometimes at a new rate, which may not be very profitable for you, if you have, for example, bought bitcoin, which has grown dramatically over the past two days. Even if the exchange rate is not changed, you will not be able to dispose of the bitcoin bought for YaM within two days before the execution of the application in any way.

At the same time, when placing YaM for the exchange there are none of such serious difficulties. So, when replenishing money to your EXMO account from YaM, the funds will be credited immediately, and within the limits set by the exchange you will be able to dispose both of them and the assets purchased for them without any restrictions (and only the withdrawal from your balance will be blocked for 72 hours).

Trading differences between the exchange and the exchanger

As already noted, each exchanger is owned by one person, while there are many players at the exchange that can influence the price situation, sometimes very significantly. It follows that a player with a substantial deposit and some skills in using it can easily "shake" the rate of certain cryptocurrencies at the exchange so that, while temporarily raising or lowering the rate, make it possible to sell off their assets at a profit or buy them at a better price than the initial one, and as a result, compensate their expenses over and above.

At the crypto-market, represented by the exchangers, it is quite difficult to do this, so you can come to a conclusion that for the exchange games it is incomparably worse.

Apart from the great opportunities for price manipulation, more or less significant cryptocurrency exchanges can absorb or sell a much larger amount of cryptocurrencies than even the largest cryptocurrency exchangers. For a trader it is often important to buy an asset potentially capable of "firing" as soon as possible. In case of exchangers, you will have to log in to your account in the payment system to buy a certain cryptocurrency, create an application in the exchanger and wait for it to be executed. If you have deposited funds at the exchange, you can buy the required cryptocurrency in the right amount just in a couple of clicks.

Technical differences between exchange and exchanger

Exchanges which have been operating for a long time and have good programmers on the staff are technically much better developed than most exchangers. At recognised exchanges:

1) Usually, the work of technical support is well established.

2) Most exchanges have the ability to use an API, which is freely available to everyone (for example, EXMO exchange provides an access to a quite functional API that can be used in four different ways). The availability of API is especially important for traders who automate their trading process and for the site owners who, for example, can use the exchange API to organize a permanent display of current exchange rates on their site or conduct their own trading of exchange codes.

3) The level of safety at the exchanges is certainly higher. Safety and security are important for any exchange if only because exchanges store funds of the client on a constant basis, while exchangers accept them only for the time of exchange. If the exchange provides protection of funds on your account using 2-factor authentication or a multi-signature system and does not forget about the "cold" storage of cryptocurrencies, it definitely can be trusted.

4) Exchange trades are held in an automatic mode, and you can sell or buy an asset at the market in 24/7/365 mode (the only thing dependant on the time of day is the activity of buying up your limit orders).

At the same time, on many exchangers, even quite large and well-deserved ones, for the exchange in some directions (and sometimes in all directions), it is necessary to have an operator who, in most cases, does not work at night.

To this, you can add that in order to sell bitcoin and other assets from your stock exchange balance, you need to do just a couple of clicks to establish the terms of the deal. At the same time, in the exchanger, after filling in the application you will have to send the cryptocurrency manually to the address specified to you, and in addition also be nervous if during the transaction, there will be some delays because of bitcoin network overload.

In general, the cryptocurrency exchanges are the most important part of the cryptocurrency ecosystem today. The views and pieces of advice of the exchange representatives are in rather high demand in the community, and certain decisions of exchanges affect the fate of many cryptocurrencies and are able to directly affect their rate. The exchangers working with cryptocurrencies, even the largest ones, cannot boast the same authority.

The opportunities of exchanges are wider than those of the exchangers, and respectively the opportunities are higher for those who use exchanges for trading, investing in cryptocurrencies or providing business operations related to cryptocurrencies.

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Best regards, EXMO team