How safe is Poloniex’s cryptocurrency exchange platform? Are the owners known & active in the crypto community? Right through this Poloniex review you will learn how this once insignificant substitute exchange gained user-trust, innovative functionality, and subsequently swallowed its competitors’ market share. From full customer refunds after a minor security breach, to a successful infrastructure redesign, and a bit a sheer luck – it’s no secret that Poloniex’s history is quite the interesting read.
Poloniex is a crypto-to-crypto global exchange operating in the US. It registered with the Financial Crimes Enforcement Network (FinCEN) as a money service business (MSB) on August 29, 2016. However, it has been in operation since January 2014.
While the bureau lists the location of exchange’s offices in Wilmington, Delaware, research shows the address belongs to an agent. Little information is available online—including on the company’s website—about ownership.
On LinkedIn and company profiling website Owler, someone named Tristan D’Agosta identifies himself as the founder and CEO of Poloniex. According to information he shares on these pages, D’Agosta is a music composer and a former freelance writer with a Bachelor of Arts in music from Rutgers University.
Advantages of Poloniex
- World’s largest Ethereum exchange (by average volume in 2017)
- Go-to place for serious crypto traders seeking new & trendy coins for speculation.
- Provides extremely detailed charts, as well as efficient data-analysis tools
- Most trading interface code is executed client-side & therefore open source for enthusiasts to examine
- Offers a high-volume margin trading & lending service for major crypto assets, on top of an exchange platform
- Its services are accessible from anywhere on the globe
- Supports over 70 popular digital assets, among the highest number in the industry
- Charges low crypto deposit and withdrawal fees compared to other exchanges
- Fully refunded affected users after a minor security breach
- Community representatives are active answering questions and hearing feedback on social media
Disadvantages of Poloniex
- Since May 2017 we are seeing some unconfirmed reports of users not being able to withdraw funds from Poloniex
- Private key management is centralized, exposing funds to custodial risks. See Bisq for a decentralized alternative.
- The inability to deposit fiat currency excludes all users wanting to use Poloniex to “on-ramp” into crypto.
- The customer support ticketing system is poor and sometimes non-existent
- The identities of managers and investors are unknown. No community interviews given so far.
- No known physical offices. Perhaps a security precaution – but still a big negative for trust.
- Increasingly requiring users to create accounts and verify their identity for high-volume activity.
- Recent downtime & slowness issues throughout the 2017 crypto boom.
- Trollbox open chat system recently deactivated. Though this has helped reduce price manipulation through the spreading of misleading information.
Poloniex’s market positioning
The lack of information on co-founders, top management, and company ownership, as well as the absence of a physical office have caused some to question the business soundness and legitimacy of Poloniex. Even for me, writing this analysis of Poloniex, I find it strange that the founders have chosen to remain so withdrawn. The safety of user funds on the exchange has been an active subject of discussion on online forums such as Bitcointalk and Reddit.
Meanwhile, public knowledge about founders, management and investors of exchanges such as Coinbase, Kraken and Bitstamp give them more credibility. Even with these existing doubts, however, Poloniex has continued to grow in terms of its user base, transaction volumes and the number of cryptos it supports.
Poloniex receives the largest amount of traffic in the crypto exchange industry. Its website gets over 50 million visits per month. The closest exchange in this metric is Coinbase with about 45 million monthly visits.
Poloniex’s largest sources of traffic are the United States (24.84%) and Russia (6.06%). Other top sources include the United Kingdom (4.65%), Brazil (3.14%) and Vietnam (3.67%).
Another feature that differentiates Poloniex with other exchanges is its lack of support for fiat currency. Some users boast that this is one of the main advantages, allow breathing-room form government regulators as the exchange does not deal in fiat currency. That being said, Poloniex supports a large number of crypto assets. As of August 2017, the number of listed coins stood at over 70.
It must be said that after the 2016 demise of Poloniex’s largest rival exchange, Cryptsy, the former acquired virtually all of it’s market share and user-base. As the most trusted alternative, users flocked to sign -up.
Two other popular exchanges that don’t support fiat currency are Shapeshift (which has about 50 crypto assets on offer) and Yobit (250 coins listed). A segment of crypto holders prefer Shapeshift because it doesn’t require users to create accounts. However, Shapeshift lacks most of the tools and services traders require such as graphs.
Poloniex offers no mobile applications, but the mobile version of the website works just as smoothly as the desktop version. The exchange has also made an API available, through which third-party developers can create tools for data analysis and account management.
Poloniex is popular with users seeking to convert from one cryptocurrency to another, margin trade, and lend. Its services are accessible from anywhere around the world and it has few requirements for signing up and trading as compared to Coinbase, Bitstamp and Kraken.
Security at Poloniex
As with all centralized exchange audits, I would like to remind readers of this Poloniex review that the exchange controls all private keys to the wallets holding your cryptocurrencies. The exchange assures users that it stores much of their deposits in offline “air-gapped” cold storage. It offers 2-factor authentication for account holders, as well as browser recognition tools.
While Poloniex’s promises of security may be based on sound capacity, users must trust that the measures in place are tight enough and that individuals in charge of funds are honest.
In 2014 the exchange suffered a minor security breach where 12% of all customer bitcoin deposits were stolen. In an unprecedented move (at the time), a statement was issued assuring users that all funds would be reimbursed. Poloniex carried through their promise to its users several months later.
As the Bitcoin project itself has shown, lack of information about a founder is not always a sign of bad intent. However, as a precaution, it is advisable to keep on the exchange only as much value as you need to lend, trade or exchange at any given time, especially considering Poloniex is a centralized platform with a high custodial risk.
As with all centralized exchanges, you should always send whatever funds you don’t immediately need on the platform to a wallet you control.
The Poloniex interface works nicely, except when the site is under strain from DDOS or legitimate peak trading times. “Un-cached” users are greeted by a standard Cloudflare “checking your browser” page. Such pages are widespread among crypto sites and are used to filter=-out botnet and malicious traffic.
In 2015 the whole interface was very successfully redesigned. There are many positive Poloniex reviews mentioning how nicely the website presentation has come along since 2014. See the evolution for yourself:
The overall user experience is close to that of using Bittrex or Kraken – though slightly more intuitive then the latter. You could even compare Poloniex with Shapeshift, except you’ll need to sign up to Poloniex while Shapeshift allows guests to trade without registration. Choosing a pairing, however, is not as straightforward as Shapeshift. You may have to work to find the page from which to choose your pairing.
A common complaint from users is that it takes a long time for deposits to reflect in the user account. Users have also reported a few cases of coins sent but never showing up in the receiving account.
Further, many users accuse the exchange’s customer support of poor and slow response to complaints. Some have reported that tickets sometimes take months to resolve.
Using your Poloniex Account
Signing up for an account on Poloniex is easier than on most other major digital asset exchanges. While it observes some level of Know Your Customer requirements, the process is less stringent partly due to the fact that the exchange accepts only crypto deposits.
Users are only allowed one account, and registering more than one could result in suspension or expulsion from the platform. Each account, however, offers exchange, trading and lending services. You automatically have access to all three services when you sign up for any of them.
The exchange service facilitates the movement of value from one crypto to another. On the other hand, the margin trading service enables you to leverage your cryptos and earn gains from price changes.
If you are risk averse but still want to make a profit on the platform, you can put up your cryptocurrencies for others to borrow and trade with. In exchange, you will receive a guaranteed interest rate.
When you engage in margin trading, you essentially have access to the three sections available on Poloniex. You access exchange, a margin trading and a lending/borrowing section. You can borrow funds from the lending section to invest through the margin trading section.
In the event you want to move your value to another type of crypto, you will need to use the classic exchange section. It is also through the exchange section that you make deposits.
When compared to trading platforms such as Coinbase’s GDAX, or Bitstamp/Kraken, I feel that Poloniex is the easiest to start using. Once your signup is complete (this takes less than five minutes) you are ready to deposit and start trading.
The most differentiating feature from the rest of the trading platforms, however, is the fact that Poloniex offers more risk-averse crypto holders the option of lending out their coins.
In addition to the three sections separated according to function, Poloniex also offers three levels of account verification.
You get the first level of verification by providing an email address, your name and country of residence at the signup stage. The level one verification allows you a daily minimum deposit and withdrawal of $2,000 worth of cryptos. You can exchange, trade and lend with this level of verification, with the only limitation being how much you can deposit and withdraw daily.
If you need to have your daily limits increased, then you will have to apply for level-two verification. You will do this by providing a physical address, postal address, phone number, date of birth and passport ID.
Along with the application, Poloniex requires you to upload an ID photo and a passport photo. With approval, your daily limit for deposits and withdrawal grows to $25,000 worth of cryptos.
You can get an even higher level account with a limit that exceeds $25,000. You apply for this level by reaching out to support. The deposit and withdrawal limits Poloniex offers are relatively higher than you will get from accounts on Coinbase, Kraken and Bitstamp.
Since Poloniex accepts only crypto deposits and withdrawals, it is one of the cheapest exchanges to use. This is due to the fact that the exchange doesn’t support “traditional” deposit methods (via fait currency), which are more costly than cryptocurrencies – due to extra regulatory requirements, KYC vetting and interbank fees.
Both the person putting up an offer to buy or sell (the maker) and the person picking and accepting an offer (the taker) pay transaction fees. Generally a maker pays fewer fees in a transaction than a taker. Maker fees range from 0% to 0.15%, while those for the taker range between 0.05% and 0.25%. In both cases, the higher the amount involved in a trade, the lower the fees paid.
Maker and taker fees apply to both the exchange and the trading platform. Lending fees are set by those putting up their funds for borrowing. Since the market is competitive, the lower the interest a lender charges, the more successful they are at having traders taking their offers.
Nevertheless, average loan offers on the platform charge at least 0.2%. From the lender’s earnings, Poloniex will take 15%.
Alternatives to Poloniex
Should you like to try something different to Poloniex, the following are the most popular alternative cryptocurrency exchanges:
- Kraken.com – not as many cryptocoins, but has high volumes & fast fiat deposit/withdraws. Good community trust. Be sure to read my comprehensive review of Kraken. (USA)
- Bittrex.com – many coins, less users – but fiat deposits > 10k usd are possible. Margin trading coming soon. (USA)
- Yobit.net – has the most available cyrptocurrencies (including worthless ones), fun to try out & has signification user-base. (Russia)
- Shapeshift.io- popular service for instant swaps between altcoins. No account needed. (Switzerland)
- Changelly – offers similar fast exchanging like Shapeshift. Fiat deposits are possible. (Czech Republic)