Poloniex in Brief
Boston-based Poloniex is a cryptocurrency-only exchange that was the first to reach $1 billion in daily trading volume. The company curates a listing of “unique” and “innovative” digital currencies that trade in high volumes. Poloniex struggled recently as its processes failed to handle the exponential growth in customers and trading volume.
However, those issues may soon fade thanks to an influx of new resources. Wall Street-backed mobile payments company Circle Internet Financial bought Poloniex earlier this year.
- Strong basket of almost seventy high-volume currencies.
- New parent company has deep pockets and strong technology.
- Repaid customers whose bitcoins were stolen in a hack.
- Does not handle fiat currencies.
- Shaky internal systems with delayed fund transfers and unresponsive customer support.
What is Poloniex?
Tristan D’Agosta, a musician and freelance composer, founded Poloniex in January 2014. Two months after the exchange went live, D’Agosta announced on the Bitcoin Forum that hackers had stolen 12% of all the Bitcoins Poloniex held for its customers. He promised to make his customers whole and earned praise from the early Bitcoin community when Poloniex repaid its customers by the middle of 2014.
At the end of February 2018, D’Agosta sold Poloniex to Circle Internet Financial, a mobile payments company backed by Wall Street giant Goldman Sachs, for an undisclosed amount. Fortune cited an unnamed source who claimed Circle paid $400 million.
In the short term, the Circle-Poloniex tie-up will eventually let Poloniex customers conduct fiat currency transactions. “We have the licenses and the relationships in order to make that happen across U.S. dollars, but also euros and pounds,” Circle president Sean Neville told CoinDesk.
Leadership and investors
Poloniex’s leadership structure is much more opaque than competing exchanges like Kraken. D’Agosta rarely gives interviews and has a minimal social media presence. Even his LinkedIn page says more about his musical career than his role leading a significant cryptocurrency exchange. Whether D’Agosta will remain active at Poloniex after the Circle acquisition is not clear.
Circle’s leadership may take a bigger role now that Poloniex is under their umbrella.
- Jeremy Allaire, Circle Chief Executive Officer: Allaire became the Chief Technology Officer of Macromedia, the original developer of Flash, after Macromedia acquired his technology company, Allaire Corporation. With a brief stint in the VC industry, Allaire went on to co-found cloud-based video service provider Brightcove.
- Sean Neville, Circle President of Product & Operations: A software developer, Neville has followed Allaire from Allaire Corporation to Macromedia to Brightcove.
- Naeem Ishaq, Circle Chief Financial Officer, Treasurer and EVP of Risk: Ishaw joined Circle in March 2018 after serving as CFO of ecommerce platform Boxed, with earlier stints at Square and Salesforce.
According to Circle’s website, investors like Facebook’s Jim Breyer, Goldman Sachs, as well as VC firms IDG Capital, General Catalyst and Accel Partners have invested more than $140 million in the private company. Crunchbase lists Breyer, Goldman Sachs and IDG Capital as Circle’s lead investors after the Series B, C and D investment rounds respectively.
Protecting customers assets
Legal and regulatory compliance
Better relationships with regulators offer a longer-term benefit of Circle’s acquisition of Poloniex. While the exchange has tried to comply with government regulations, it apparently came under scrutiny by America’s Securities and Exchange Commission (SEC). However, The New York Times journalist Nathaniel Popper uncovered a presentation claiming that the SEC “was very favorable” to Circle’s plans to register Poloniex as a licensed alternative trading system, or ATS.
After the United States’ Commodity Futures Trading Commission (CFTC) declared that digital currencies are commodities and subject to its regulations, Poloniex filed a petition late last year asking the CFTC to clarify its policies “not only for the benefit of our company, but for the industry at large.”
Coin listing policies
While Poloniex lists nearly seventy digital currencies, the exchange is selective about the cryptocurrencies it lists and uses a listing criteria to evaluate whether a cryptocurrency should be, or should continue to be, listed.
The projects must be “unique” and “innovative” — and have some built-in demand. Poloniex will delist coins that fail to generate interest by the community of traders.
To avoid conflict with Securities and Exchange Commission regulations, Poloniex also rejects any token that would look like a security to regulators.
Poloniex maintains full reserves of its customers’ assets. Most of those cryptocurrencies are kept in an offline cold wallet that is air-gapped from any network. A small percentage of the deposits remain in an online hot wallet to support trading on the exchange.
Poloniex supports 2-Factor Authentication (2FA) through a mobile device. Android and iOS owners must use the Google Authenticator app while Windows Phone owners must use the Microsoft Authenticator app. Poloniex does not support the less-secure option to use SMS for 2FA.
You can only apply 2FA to account log-ins. Poloniex does not support more granular 2FA options, such as when placing orders.
Poloniex has a self-serve support site with well-documented articles about the exchange and how to use its tools. If you are new to trading, Poloniex provides a detailed walkthrough of margin trading on the exchange.
A ticket-based system handles all customer support issues through email. Poloniex does not offer telephone or chat support options.
The rush of inexperienced traders into the cryptocurrency market tested the systems at every exchange to the limit. Long delays in completing transactions and unresponsive customer service are common complaints against crypto exchanges in the midst of exponential growth.
CoinTelegraph reported early this year that Poloniex was inaccurately reporting customer balances, not crediting balances after orders were canceled, and months-long delays in processing withdrawals.
The reports may be more than anecdotal. When Circle founders Neville and Allaire announced their purchase of Poloniex, they cited improving the exchange’s systems as a top priority:
“Firstly and immediately, you can expect Circle to address customer support and scale risk, compliance, and technical operations to bolster the existing product and platform.”
How to Join Poloniex
Who can join?
Crypto traders from more than one hundred countries can join Poloniex. In the United States, however, there are a few states where Poloniex refuses to do business.
Poloniex suspended its operations in New Hampshire back in 2016 after the state passed a law subjecting exchanges to regulations as money transmitters. New Hampshire rolled that law back last year, but Poloniex has not re-opened in the state.
Like many other exchanges, Poloniex is not available in the state of New York where the burden of registering for a BitLicense has driven all but the biggest players away. D’Agosto explained to Bitcoin Magazine that the application process was too expensive for small businesses, saying that “we are not big enough to qualify for a BitLicense.”
Poloniex does not do business in the state of Washington, where cryptocurrency exchanges get treated like wire transfer firms. Among the regulations that drive exchanges away is the requirement to have reserves that equal their customers’ holdings. Strangely, Hawaii and Wyoming have similar regulations but Poloniex still does business in those states.
Before you can begin trading, Poloniex requires you submit Know Your Customer information such as address, date of birth, and photos of government-issued identification. You must also submit an identity verification photo, essentially a selfie that documents your application.
You may expect the automated verification system to quickly process applications. However, Poloniex has experienced a dramatic rise in new account applications. If anything about your submission is off, the verification process may take weeks to complete.
What You Can Trade on Poloniex
Currently, Poloniex supports exchanges in sixty-six digital currencies:
Ardo, Augur, Bela, Bitcoin, Bitcoin Cash, BitcoinDark, BitcoinPlus, BitCrystals, BitShares, Bitmark, Blackcoin, Burst, Bytecoin, Civic, CLAMS, Counterparty, Dash, Decred, DigiByte, Dogecoin, Einsteinium, Ethereum, Ethereum Classic, Expanse, Factom, Florincoin, Fridcoin Research, GameCredits, Gas, Gnosis, Golem, Huntercoin, LBRY Credits, Lisk, Litecoin, MaidSafeCoin, Monero, Namecoin, NAVCoin, NEM, Neoscoin, Nexium, NXT, OmiseGO, Omni, PascalCoin, Peercoin, Pinkcoin, Primecoin, Radium, Riecoin, Ripple, Siacoin, Statis, STEEM, Steem Dollars, Stellar, Storj, Synereo AMP, Syscoin, Tether, Vcash, Vericoin, Vertcoin, Viacoin, Zcash and 0x.
Poloniex does not support exchanges or trades in fiat currencies.
Although Poloniex supports exchanges in sixty-six currencies, you can not exchange directly between all of them. All exchanges must be with either Bitcoin, Ethereum, Ripple or Tether.
You can exchange between Bitcoin for these sixty-five digital currencies: Ardo, Augur, Bela, Bitcoin Cash, BitcoinDark, BitcoinPlus, BitCrystals, BitShares, Bitmark, Blackcoin, Burst, Bytecoin, Civic, CLAMS, Counterparty, Dash, Decred, DigiByte, Dogecoin, Einsteinium, Ethereum, Ethereum Classic, Expanse, Factom, Florincoin, Fridcoin Research, GameCredits, Gas, Gnosis, Golem, Huntercoin, LBRY Credits, Lisk, Litecoin, MaidSafeCoin, Monero, Namecoin, NAVCoin, NEM, Neoscoin, Nexium, NXT, OmiseGO, Omni, PascalCoin, Peercoin, Pinkcoin, Primecoin, Radium, Riecoin, Ripple, Siacoin, Statis, STEEM, Steem Dollars, Stellar, Storj, Synereo AMP, Syscoin, Vcash, Vericoin, Vertcoin, Viacoin, Zcash, 0x
There are a dozen currencies that can be exchanged for Ethereum: Augur, Bitcoin Cash, Civic, Ethereum Classic, Gas, Gnosis, Golem, Lisk, OmiseGo, STEEM, Zcash, 0x
You also get twelve options for exchange Tether: Augur, Bitcoin, Bitcoin Cash, Dash, Ethereum, Ethereum Classic, Litecoin, Monero, NXT, Ripple, Stellar, Zcash
You can only exchange eight cryptocurrencies with Ripple: BitcoinDark, BlackCoin, Bytecoin, Dash, Litecoin, MaidSafeCoin, NXT, Zcash
Poloniex supports margin trading for eleven Bitcoin pairs. These include Bitshares, CLAMS, Dash, Dogecoin, Ethereum, Factom, Litecoin, MaidSafeCoin, Monero, Ripple and Stellar.
The trades you can make with Poloniex are buy, sell and stop-limit orders.
You can also place funds in a lending account. Other traders can borrow from those funds, paying you interest in return.
Linked accounts are an undocumented feature that lets you track your trading performance better. You could create an account dedicated to a specific trading strategy, for example, or dedicate an account to trades in a specific currency-pair.
Trading Tools and Fees
The Poloniex web app has a simple layout with separate pages for currency exchanges, margin trading and lending. To the right, summary pages provide you with at-a-glance reports on balances and orders. The settings section lets you activate 2FA, change your password, review your login history and view your trading tier status. The profile section lets you update your personal information as well as the undocumented linked account feature.
The exchange and margin trading sections share a similar layout. At the top of the page are charts and tables showing the price history and the most recent prices. The markets table in the exchange section allows you to tab between the four primary cryptocurrency markets (BTC, ETH, XMR and USDT) to view the latest exchange rates. The markets table in the margin trading section shows the latest prices and volumes for the bitcoin-cryptocurrency pairs.
Poloniex’s time series charts only offer a narrower selection of analytical tools compared to some of its competitors. The only ways to slice the data is with Fibonacci Levels; settings for SMA, EMA1 and EMA2 periods; and Bollinger Bands.
Further down the page, Poloniex displays a market depth chart and tables of recent activity in that particular market.
Mobile app support
Poloniex does not have a mobile app. All trades and transactions must go through the exchange’s web app. Several third-party developers have used the Poloniex API to create apps that provide real-time market updates.
Do your due diligence before downloading any of those apps. Counterfeit Poloniex apps have appeared on Google Play over the past year. These malicious apps have burned several thousand people by collecting their personal information and Poloniex account information.
Last November, CoinTelegraph reported that more than 5,000 people had downloaded a fake Poloniex app that tried to get their account credentials and email logins.
Deposits and withdrawals
Poloniex does not accept deposits of fiat currencies. That will likely change with Circle’s acquisition. Allaire and Neville said in the announcement that they were “exploring the fiat USD, EUR, and GBP connectivity that Circle already brings to its compliant Pay, Trade, and Invest products.”
Unless a currency has additional requirements, depositing coins is simply a matter of generating an address in the Poloniex web app. Enter that address and the amount you want to transfer in your digital wallet.
Some digital coins have minimum deposit requirements in which case Poloniex will charge a network fee which it does not keep. Poloniex itself does not charge fees for deposits.
Withdrawing coins is just as straightforward: enter the address from your digital wallet and the number of coins you want to transfer.
In most cases, the transaction will go through in a couple of minutes. At times of high network congestion, however, it can take as long as an hour for transactions to complete.
Poloniex does not charge fees for withdrawals. However, network fees may apply.
The Poloniex fee schedule is based on a maker-taker structure with fees declining as your 30-day average trading volume increases. Poloniex calculates trading volumes for each account once a day.
Makers whose trading volume exceeds 24,000 Bitcoins can make all their trades for free. The highest volume takers will see their fees fall to five basis points.
Poloniex also charges a 15% fee on any interest you earn by loaning your funds to other traders.
Poloniex earned a strong reputation with bitcoin early adopters after its launch — especially for the way it handled its only serious hacking incident. Towards the end of 2017, however, Poloniex was one of the exchanges struggling to handle the exponential growth in new subscribers.
The acquisition by Circle should give Poloniex enough financial and technological resources to restore customers’ faith. They may also be reassured by Circle’s intention to make Poloniex the center of its blockchain strategy.
For new traders
Poloniex offers a wider range of cryptocurrencies than some of its bigger competitors. At the same time, Poloniex curates its listings to ensure the digital currencies have reasonable trading volumes.
The exchange’s guide to margin trading is a nice introduction to the mechanics of using leverage to maximize trading gains.
However, as Poloniex is a crypto-only exchange, you will need to find someplace else to make your first purchase of bitcoins or other digital currencies. Coincidentally, many people have turned to Circle for this very reason.
For advanced traders
Poloniex offers a decent basket of currency pairs for margin trading. The Circle acquisition promises to add fiat currencies as well as expand the basket of cryptocurrencies even further.
Anyone accustomed to trading traditional currencies, however, may be frustrated by the limited selection of analytical tools in Poloniex’s interface.