Buy and Sell Tokens Without an Exchange: 7 Steps
It is a well-known fact that in order to trade tokens, they must be listed on cryptocurrency exchanges. As of today, centralized exchanges are the most commonly used, but investors face a number of difficulties while dealing with them. The first and most important issue is that the ICO token sale has to be over. Only after that can the tokens get on the exchange. The period before listing can last up to 90 days! Another issue is that centralized exchanges don’t provide user anonymity or fully control the funds. This leads to possible risks concerning privacy, thereby posing vulnerabilities to hacker attacks. Another crucial drawback is the token price: centralized exchanges influence the token market price, which can be significantly lowered due to a large amount of cryptocurrency on the exchange and charged fees.
Trading certain types of tokens can be problematic, as centralized exchanges don’t always support all tokens due to various reasons. The above-mentioned issues make investors look for other ways to buy and sell their tokens without using centralized exchange platforms. Let’s take a closer look at the current opportunities, and evaluate their pros and cons.
1. OTC Market
OTC stands for over-the-counter trade. OTC trading allows investors to conduct high-volume trades without third-party involvement and centralized control. The market is made up of all participants who trade between each other in an offline manner. Such trading is especially effective due to its ease and fast access to the liquidity pool. The coin/token market price is not affected. The main benefit here is that OTC transactions result in a low price for participants.
Among OTC disadvantages is that this kind of trading process requires extra work and effort. Additionally, it is more suitable for a large amount of cryptocurrency, as according to terms and conditions, the trade amount must be higher than the volume equivalent of $100,000.
2. 0x Protocol
To eliminate central authority interference, many investors end up using 0x (zero-ex) protocol. The main protocol features are:
- there is no central party
- it is not subject to government regulations
This protocol differs from centralized exchanges in a beneficial way: it eliminates the inconvenience of charged fees. 0x can be built on the following projects:
Blockchain technology is used only in the settlement of the trading procedure. Order-book operations are done in an off-chain manner.
The limitations of 0x protocol have to do with types of tokens. Not all tokens can be bought or sold using this protocol — only those that follow the ERC20 standard.
3. Combination of 0x Protocol And Metamask
An absolutely new concept of trading tokens is presented by a mixture of 0x protocol and Metamask. Such a combination of platforms allows the creation of a safe and trustless way to buy and sell ERC20 tokens. It is possible to perform over-the-counter trade in a decentralized manner and exchange tokens for any other cryptocurrency, regardless of centralized exchanges and trading platforms. Another advantage is its ease of use.
On the other hand, this solution is new in the crypto community. It supports only the ERC20 token standard as well as 0x itself. Currently, acceptance of a new token standard is in the development stage. The 0x and Metamask combination will be a great choice to shorten the listing period of tokens. It has a great potential, the outcome of which will be seen in future progress.
4. Atomic Swap
Atomic swap is a technology that enables investors to trade their tokens peer-to-peer without a central point of authority. This trading process proves trustless, as it ensures that both parties meet their requirements according to the contract. It is safe in terms of providing commitments: if one party fails to adhere to the requirements, the other will be refunded due to the time-locked contract.
Atomic swaps benefit from speed of execution. Its cryptographic proof-of-payment validates blockchain-based payment and processes it quickly. This is how the atomic swap works:
There really aren’t any disadvantages of using this technology, but it should be stressed that it doesn’t work as a separate project; one should research which projects currently use atomic swap technology to trade tokens.
5. Cryptocurrency Meetups
Another option for investors to trade their tokens is to visit token offering meetups. Meetups like these study global crypto trends and financial distribution systems, offering participants the ability to trade their tokens if they weren’t accepted on exchange platforms due to reduced popularity.
The meetup idea is great, but it faces a range of issues:
- Meetups are held all over the world, and it is geographically inconvenient to attend all of them.
- You can’t be sure that you will find a buyer/seller of the token you’re interested in.
- Attendance places may be limited.
6. Omise Go
One more interesting solution is the Omise Go platform. This is a new decentralized financial network of next generation. Omise Go enables investors to perform wallet-to-wallet crypto and fiat transactions, access and manage digital assets that are securely stored on blockchain, and rapidly exchange currencies with multi-asset and cross-chain combination mechanisms.
One disadvantages is that this blockchain network is built from scratch; therefore, it requires additional development solutions. Additionally, operations are mainly focused only in several Asian Pacific countries.
7. Decentralized Exchange Platforms
Last but not least is the option to choose a decentralized platform to buy and sell tokens. They provide greater anonymity and security than centralized exchanges, allow users to control their funds, are independent of governmental control, and eliminate downtime.
Among the most popular decentralized exchanges are Token.Store, IDEX.market, Dibbs. It should be emphasized that decentralized exchanges have their disadvantages, too. They are not as quick as centralized exchanges, have low liquidity, can be difficult to use, and do not provide that many advanced functions in the trading process.
This is where Bdaq platform comes at use. Bdaq is a decentralized platform, as well, but its distinctive feature is that it was developed while considering all drawbacks of the decentralized system, thereby offering advanced and efficient solutions.
Bdaq is designed for investors who want to buy and sell their tokens before the end of an ICO listing process. They don’t have to wait up to 90 days for the coin listing, and don’t have to be whitelisted. If an investor misses out on tokens in the crowd sale, he or she can request buy/sell orders on the Bdaq platform.
Check out the Bdaq white paper for more details!
In conclusion, it should be stated that there are many alternatives to centralized exchange platforms. If investors want to protect their personal data and avoid inefficiency, vulnerability, or manipulation, they have other options to choose from. Because not all types of coins can be listed on the centralized exchange, and not all investors can participate in such trades, there is the option to choose decentralized technologies and platforms such as 0x protocol, OTC market services, atomic swap technology, OmiseGo, or Bdaq platforms as well as attending crypto-trading meetups. Be sure to evaluate their individual features to make the right choice!