Let’s talk about exchanges.

Hey y'all,

(For the record, this is coming from the lens of an American)

TL;DR at the bottom!

I've been seeing a lot of discussions about what exchanges we should be using, and tons of recommendations have been flying around. I'd like to talk about some of them, and see if we can get the community using better, more private exchanges.

So obviously we have centralized exchanges, which I'd assume most everyone's familiar with. These include your Coinbases, Krakens, Binances etc.

These exchanges are beholden to countries' laws because they're companies, and can't hide from the law.

This generally means these exchanges practice Know Your Customer (KYC). This is a concept that's existed in the traditional finance space basically forever. The exchanges gather data on you so they can report to whatever federal agencies what you're doing ( as well as target you with advertisements, sell your data to their partners, and whatever else you agreed to in their terms of service).

The other category is the decentralized, non-KYC exchanges. Some examples of these include Bisq, HodlHodl, and Robosats (this one is lightning only). The benefits of these exchanges is that they are very private, little to no information is gathered about you, so nothing is being reported, and the ability to sell your data is minimized if not altogether eliminated.

For what it's worth: I am not advocating people not pay taxes, I'm advocating for you to take privacy seriously, Pay your taxes appropriately you do not want the IRS or your country's equivalent to come after you!

Sounds great right? Well it is, but there's a bit of a catch: mostly being p2p exchanges (there are exceptions to this) The liquidity can be hit or miss, and you usually pay a premium for the services.

There are a few exchanges I know of that kinda fall between the two (Relai in EU, Bull Bitcoin in Canada) but we'll address them later.

So what's right for you? Well, that's the rub, there's tons of exchanges out there, with varying degrees of shadiness.

Let's go through some of the centralized exchanges, in no particular order (keep in mind, I'm American).

Starting with one everyone knows. Coinbase:

A lot of users know this exchange through word of mouth, advertisements, and perhaps targeted ads. They've been around for a long while, seem to have a good reputation, so they're probably a good choice, right?

Unfortunately not.

Coinbase has a history of really shady practices. They champion a lot of shitcoins, which are all centralized scams.

They disguise this with their "Coinbase learn system" watch a bunch of advertisements that are thinly veiled as education, to get you hyped about whatever crap they decide they want to peddle, then you take a test, to make sure their trash stuck in your head, and you get some small amount of whatever crap to hook you.

Not to mention that they recently implemented Plaid to connect your bank account, which requires you to login to your bank through that third party (which giving a third party my user name and password to my bank is a giant red flag to me). This gives them access to information like your accounts' balances, transaction histories, your full name, address, phone number, email address etc.

They claim that they don't store any of this data, but how can we really be sure. Even if they don't they already can make a pretty good profile of you, and can probably effectively market to you with your income info as well as whatever engagement you've done with learn.

Coinbase also has been dumbing down their tools, closing down Coinbase pro (formerly GDAX) and launching Coinbase one, a subscription based service that is neutered when compared to Coinbase Pro.

On top off all that, multiple people from Coinbase have been accused (and convicted) of insider trading. Not to mention during the blocksize wars Brian Armstrong championed the shitcoin that was forked off of bitcoin, then allowed Coinbase employees to trade it before the general public could.

Coinbase shouldn't be supported.

Strike and Cash App:

These two also seem really good from a newbie's perspective: they're bitcoin only, they have slick intuitive UIs, fees are decent.

However, like Coinbase both Strike and Cash App (this source was buried hard, ctrl + f for Plaid) use Plaid to link bank accounts. This is a complete nonstarter for me. However, there is a workaround at least for Strike (at the time of this post), you can add a debit card and use that to fund the account. I think this also works for Cash App, but I haven't confirmed.

Another issue with Strike is that it's custodian is Prime trust, which has a lot of shitcoin liability, so that definitely is a risk.

As far as Cash App, I couldn't confirm their custodian, their documentation is super hard to parse, which honestly a red flag in itself imo.

I'd say use these cautiously, and definitely not with a bank account.

Binance:

Another famous, or perhaps infamous exchange. Binance has all of the shitcoin problems Coinbase has, and more.

Binance will list any scam under the sun to try to get some fees off their unsuspecting users. They target people who like to gamble, and they target them HARD.

perhaps the most egregious thing Binance tried to pull was Proposing a bitcoin reorganization (not the best source, but it was the best I could find at the moment)due to their incompetence and getting hacked, and having ~7000 bitcoin stolen from one of their wallets. The community of course gave them a lot of backlash, and it was dropped.

Binance is definitely not to be trusted. I would avoid them at all costs.

Gemini:

The SEC is suing them for listing unregistered securities (IE shitcoins) and It's run by the Winklevoss twins, need I say more?

Kraken:

Like so many others, they support and push shitcoins, and they pander to gamblers again trying to siphon fees off of their users. Their fees are also not great, and their KYC is pretty invasive, but maybe not as bad as with Plaid.

I personally wouldn't use them.

River Financial:

I feel like this one is lesser known in the community, but I could be wrong. They're bitcoin only, they seem to self custody said bitcoin which in itself isn't the greatest, but at least it seems like they don't use something like prime trust.

They have a decent section about bitcoin and the tech behind it, I haven't gone through it all, but from what I did look at it seems good.

They don't use Plaid from what I can tell, but they do collect a lot of information, at least it seems they keep the information in house, but still who knows exactly what they're doing with it.

Honestly, We have it pretty rough here in the states for custodial KYC exchanges, I don't love any of them but if I had to choose I'd either go Strike with a debit card, or River Financial.

No matter what you choose. Withdraw your bitcoin to a wallet you control as soon as possible!

All of the exchanges outlined so far are completely custodial, and you know what we say, Not your keys, not your coin. Don't be lazy about this, especially with all of the various exchanges and yield farms folding, you never know which exchange is next.

For what it's worth, this isn't an exhaustive list, but I feel like it's pretty representative of what we have here in the states.

Let's talk KYC Free!

This post is turning into a novel, so I'm going to link This great resource on why KYC free is important but I do want to call out this section:

Why is providing this information a risk?

Data leaks

KYC information ties your personal identity to any bitcoin you purchase. The exchange knows…

How much you bought

When you bought it

Your banking information

Where you withdraw to

A central party holding millions of people’s sensitive and personal information creates a huge honey pot at risk of being stolen due to incompetent security practices at some of these companies. How would you feel if your name, address, photo and exactly how much Bitcoin you own was stolen from an exchange and being sold to the highest bidder on a darknet market? This sounds like scaremongering but data leaks happen all too often!

So let's look at a few KYC free exchanges!

Bisq:

Completely decentralized, you can use your own node, so you don't need to go through theirs!

being KYC free, they collect very little information about you. It's a P2P exchange, so you are at the whim of who's buying and selling at any given time, so liquidity, spread, and fees can be hit or miss. That being said, the more people who use it, the less prevalent those issues will be.

They do have their own shitcoin which is unfortunate, but they don't really force it upon you.

They use an escrow system (ctrl +F "Trading") which is great, funds are only transferred when both parties agree that the deal is good. The downside of this is that you need to have some btc before hand to deposit as collateral. They're also non-custodial, so once the transaction is complete, the funds go directly to your wallet!

Full disclosure, this is the non-KYC exchange I use most, I just like the level of privacy offered.

HodlHodl

Silly name, but decent exchange. It's very similar to Bisq (P2P, Escrow system, non-custodial) It doesn't seem to have it's own shitcoin, but it also doesn't seem like you can use your own node, so there's a couple tradeoffs with Bisq.

Admittedly, I've only used this a few times (I like using my own node, therefore I go with Bisq).

Robosats

This one's an interesting one! at first blush it seems pretty similar to the other two: Non-custodial, P2P, no KYC, has escrow. The interesting part is it's all over the lightning network! So transactions once agreed upon are fast and fees are low.

I don't really like how a lot of their tutorials are videos (I like to read!) and you should know some of the ins and outs of the LN network ( they do an ok job at describing it) but this one is a fun one, especially if you want to play around with lightning!

These are obviously not the only ones, the resource above lists a couple more KYC free exchanges, I encourage everyone to take a look, and see what you like!

Some honorable mentions!

I'll admit, these are exchanges that only operate outside of the US, so I have not had the pleasure of trying them out but:

Bull Bitcoin (Canada):

This is a non-custodial, (again, meaning once the transaction is complete, the funds go directly to a wallet you control), bitcoin only, "minimal KYC" ( the second level doesn't seem too invasive) exchange.

They have some decent material explaining what bitcoin is, their faq is clean, and imo the documentation is easily perusable. I hear good things about this exchange from my canadian friends. Also it's bilingual, so even the Quebecois will have no issues using it!

Relai (Europe):

This exchange is based in Switzerland and is a bitcoin only, non-custodial, no KYC exchange!

It's not P2P so it doesn't seem to suffer from the liquidity issues that the P2P exchanges I listed above do! From what I can see, it doesn't seem like you can use your own node, but that comes with the territory of being a centralized exchange.

The docs are kinda annoying to navigate, but what's there is pretty good.

I've heard good things from my EuroPals, so that's why I'm including it here.

TL;DR:

First off I want to stress again. PAY YOUR TAXES! THIS POST IS ABOUT PRIVACY (and not supporting bad actors)!

Unfortunately we here in the states get shafted when it comes to reliable bitcoin exchanges.

The only ones I would even consider that enforces KYC are Strike (as long as you can use a debit card, avoid Plaid like the plague).

As well as River Financial ( still pretty invasive, but at least the info isn't with a third party).

My recommendation would be heavily on the P2P no KYC exchanges. My favorite is Bisq due to the extreme privacy, but take a look here for more options!

For my Canadian friends, look at Bull Bitcoin, and for my European friends, check out Relai.

Thanks for stopping by!

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