Exchange services: should you use them? For many newcomers in the cryptocurrency world there are some annoying barriers to entry for joining in the market. One of the primary headaches comes from all of the almost countless number of exchanges to keep up with. Between keeping up with a variety of usernames, email addresses and passwords and remembering which exchanges offer which cryptocurrencies, there can be a never ending list of information to track.
However, for those first getting introduced who want to keep things simple, especially if there are only a handful of cryptocurrencies you’d like to invest in, there are other options. Exchanges are great for day traders and those looking to be able to trade quickly with a large number of assets, but there are other, more simplified services like Shapeshift, Changelly and BlockTrades. Let’s take a look at some of the most common ones and see what makes them different from big names exchanges like Binance, Bittrex, and Poloniex.
Exchange Service vs Exchanges
You might be thinking to yourself, “Hey, I’ve already used an exchange before, what makes ‘exchange services’ any different?” And that’s a fair question. The biggest difference between the two options revolves around simplicity and user credentials. But what do we mean by that?
This is the biggest strength exchange services have over exchange platforms. Instead of treating cryptocurrency trading like a foreign exchange (Forex) trader, exchange services are a lot more like going to a financial institution when travelling abroad. If you’re going on vacation to Europe, things will be much easier for you to go and exchange your US dollars for euros at a traditional financial institution instead of setting up a Forex trading account, funding it, and trading for a foreign currency.
Likewise, exchange services are meant to keep things simple. You only need to hold some type of big name cryptocurrency, mainly Bitcoin (BTC) or Ether (ETH), to exchange for a variety of other cryptocurrencies. [Note: If you haven’t already purchased your first BTC, ETH, BCC, or LTC, you can read how to here.]
After you’ve made your first purchase of any of the main cryptocurrencies, you can go on to select whichever cryptocurrency you’d like to trade for on the exchange service’s website. We’ll take a look of some of the most well-known exchanges in a bit.
This next difference is an incredibly important factor for many still getting into the cryptocurrency markets or those who don’t like having to share personal information. Because of the current know-your-client (KYC) requirements being forced onto more and more exchanges, many look to exchange services as an alternative.
When creating an account on any major exchange, users are often required to submit documentation showing proof of residence, citizenship, bank account information, you name it. While this may not be a big deal to some, the constant need to hand over personal information to a company can be a deterrent to many.
Unlike big exchange platforms, most exchange services don’t even require uses to create an account to use the service. Though many still offer the option for anyone who’d like easy-access to a record of their exchanges, creating an account is not necessary at all.
Even for those who have no concerns countlessly handing over documentation for opening an exchange account, not to mention having to wait for verification, there’s also the headache of keeping track of all of your credentials (username, password, captcha, 2 factor authentication, etc) for different exchanges. Things can be a lot simpler by choosing a few exchange platforms that you like and trust, then using an exchange service for coins and tokens you’re interested in that are not offered on the platform.
Should You Use Them?
After considering the importance of the two main factors that separate exchange services from exchange platforms, it becomes pretty clear that they’re an important tool to keep at your side. While exchange services don’t need to be your only choice as an investor for purchasing cryptocurrencies, they can make a fine addition to compliment the platforms you’re already trading on.
If you still haven’t spent much time investing further in cryptocurrencies yet, then exchange services can be a fantastic way to branch out beyond the main currencies like Bitcoin and Ethereum to diversify your holdings in your portfolio. These services are not for day traders, but if you’re looking to make a purchase of a cryptocurrency for a long term “hodl” without all the headache, then services like Shapeshift, Changelly, and BlockTrades are definitely a viable option..