What is EtherDelta?
EtherDelta is a decentralized cryptocurrency exchange which was established in 2017 by Zack Coburn. The exchange manages deposits, trading, and withdrawals through the use of smart contracts after the user has integrated its personal wallet.
EtherDelta became popular amongst traders that were looking for ERC20 tokens that were not supported on more mainstream exchanges. At its highest, the exchange produces over $10m in daily trading volumes, being the go-to platform in 2017 for ERC20 traders. But due to a change in management and as more competitors entered the market, these volumes have slowly declined since then.
Trading on EtherDelta
The site’s most notable feature is its use of smart contracts and the fact that you don’t need to open an account in order the trade. The only requirement is to integrate a wallet on the site.
EtherDelta features a compact interface which is not very intuitive and can take some time to get used to. This not very user-friendly can lead users to misread and wrongly type orders. It’s not uncommon for users to make costly mistakes when using the exchange.
On the front page, you will find the wallet, order book, and price chart and no other pages have to be accessed in order to complete a trade.
The “Select Account” button enables users to link an existing Ethereum account or to generate a new one with the exchange. There is a wallet syncing functionality for Meta Mask or Ledger Nano S wallets. You can manage your account by clicking on the drop-down menu in the upper right corner of the site. Then any wallets or keys can be imported or linked with the site.
To navigate the exchange, you must first send to the exchange wallet cryptos from your personal wallet. To do this, select “Deposit” from the Balance box on the left side of the page and under “Wallet” the funds from your personal wallet will be displayed. The funds transferred to the exchange is listed under “Ether Delta”. Enter the amount of ETH or ERC20 token you want to transfer from your personal wallet and then click on “Deposit”.
Withdrawals are the same, click on Withdrawals in the Balance Box, enter the amount you want to move from EtherDelta back into your personal wallet, then click “Withdraw”.
Because every trade is done using smart contracts and the site depends on the Ethereum network, the trades move very slow especially if there is a serious network jam.
Users can trade with a variety of ERC-20 tokens on the platform and place market and limit orders just like using centralized exchanges. Supported tokens include RChain, Populous, 0x, OmiseGo, Basic Attention Token, and Binance Coin. All tokens are traded against ETH.
The EtherDelta team posted the exchange’s fees on Reddit. We have listed the main fees below:
- Deposit ETH: ~0.0003 ETH fee
- Withdraw ETH: ~0.0001 ETH fee
- Deposit token: ~0.0001 ETH fee
- Withdraw token: ~0.0002 ETH fee
- Trade: ~0.0003 ETH fee
- Cancel order: ~0.0002 ETH fee
EtherDelta does not charge any fees for placing an order as it doesn’t require an Ethereum transaction and therefore no gas fee. EtherDelta only charges a 0.3% fee for the person that executes an order (paid in the currency being sold).
Deposits and withdrawals are also free of charge.
How Safe Is It to Use EtherDelta?
Theoretically, by using smart contracts and personal wallet integration, EtherDelta should be very secure. The exchange employs a number of servers in order to not keep the funds on the platform. The transferred funds are stored within an account based inside the exchange’s network.
Hackers are able to view your wallet address, but without the private keys, they cannot gain access to your funds. But in December 2017, EtherDelta’s DNS server suffered a phishing attack. The EtherDelta website was compromised, allowing the hacker to replace it with a fake version of the exchange. The hacker managed to steal 305 ETH, worth at the time over $244,000.
The hacker also succeeded in getting a hold of the private keys of users who deposited them on the false website. This led to many funds being stolen from users even after the real site was restored.
It also seems that EtherDelta changed its management as it was sold by its original founder Zack Coburn. The new team made some unpopular implementations such as including an ICO and changing projects to list their token on the platform.
Users have also expressed their dissatisfaction with a change in the new fee structure with some receiving notices to pay fees over the amount specified in the Reddit post. But the most damage the new team has sustained is the loss of confidence which required years to build.
- Decentralized trading
- Wide token selection
- Trading process is not intuitive
- Limited by the Ethereum network
- Slow transfer times
- No information about its management team
EtherDelta had a very promising debut, but the recent hack and actions of the new management team have eroded the community trust it gathered so far. This lack of trust prompted the creation of the ForkDelta project that intends to restore the former practices of the exchange.
The US Sec goes after EtherDelta, Ethereum token trading platform
- The SEC charges Zachary Coburn with iperating unregistered exchange.
- EtherDelta has features typical to traditional exchanges.
The US Securities and Exchanges Commission charged Zachary Coburn, the founder of EtherDelta, with operating unregistered securities exchange. EtherDelta is a decentralized trading platform and a secondary market for ERC-20 tokens, issued for crowdfunding purposes via initial coin offering (ICO), which are considered as securities under the existing SEC’s ruling.
EtherDelta served as a marketplace for buyers and sellers for the security-like digital asset securities. They were able to settle deals via a dedicated order book, while orders were displayed on the website. The EtherDelta’s smart contract used to execute the orders was coded to validate the order messages, confirm their terms and conditions and update the distributed ledger.
“EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, commented in the official press release.
The regulator stressed that the overwhelming majority of EtherDelta orders were executed after the notice of 2107, where the SEC determined that tokens as securities. However, the exchange was not registered with the SEC and never applied for a waiver under the Federal securities laws.
“We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology. But to protect investors, this innovation necessitates the SEC’s thoughtful oversight of digital markets and enforcement of existing laws.”
Zachary Coburn neither accepted nor denied his guild, but consented to pay $300,000 in disgorgement, $13,000 in prejudgment interest, and a $75,000 penalty. The SEC confirmed that Coburn had cooperated with the regulator and thus avoided greater penalties. This case has become the first precedent of charges towards the platform that has never dealt with fiat currencies. Also, it means that the SEC places all Ethereum-based tokens on one shelf with securities.