Bitcoin Blog Articles

EtherDelta - The Minor Leagues for Crypto Scouts

(11/23/2017) Mark A. Cenicola

EtherDelta is a decentralized exchange for trading Ethereum based tokens (ERC20 tokens). What this means is that EtherDelta is decentralized in the sense that it relies on the smart contract functionality built into the Ethereum network to manage your funds. It’s still controlled via a central group of programmers who built the exchange, benefit from its trading fees and have ultimate authority over the interface and which tokens appear in the formal list.

The decentralization aspect means all funds are stored within the smart contract network meaning that as long as you have access to the private keys to the wallets used on the exchange, your Ether and ERC20 tokens are under your control even if something happened to the exchange itself.

Outside of the fact that EtherDelta is decentralized, the other main benefit of this exchange is that it allows any Ethereum token to be traded. While they have an official list of tokens, you only need to know the Ethereum contract address of a token to be able to trade it without anyone’s permission. 

Initially, the BannerCoin project, of which I’m involved, began trading using the contract address which looks like this:

Now that it’s in the official list, it has a more user friendly URL which looks like this:

EtherDelta is significantly more complex to use than many exchanges and only supports trading Ether for tokens and vice versa. Due to the interface quirks and other challenges, it’s certainly not for the entry level crypto trader.

EtherDelta is a great place to find up and coming cryptocurrencies before they are well known within the cryptocurrency community. It’s like the minor leagues - the first place ERC20 tokens go to trade before they get picked up by the bigger (and centralized) exchanges.

Since EtherDelta can be difficult to use and requires users to already own Ether in order to trade, it’s less likely to be used by the mass crypto audience. Advanced crypto scouts can use EtherDelta as an opportunity to get into tokens before the prices increase significantly after big exchange listings are announced.

In addition, even when a token gets listed on a bigger exchange, good crypto scouts may sometimes find the cost per token less on EtherDelta because the volume is typically lower and only has one trading pair (ETH to token) whereas bigger exchanges may have BTC, ETH and even fiat trading pairs for a particular token. This makes it a good idea to check EtherDelta for arbitration opportunities where you can purchase tokens lower on EtherDelta and sell them for more on centralized exchanges. 

There are no guarantees tokens will ever be listed on larger exchanges similar to how over-the-counter stocks are traded versus those listed on NYSE or NASDAQ and the value could easily go down and even to zero. This is crypto after all and the risks are huge!

Make sure to use common sense when trading tokens, especially if you plan to hold for the long term. Tokens issued by organizations without shipping products, actual customers and proven track records are extremely risky. Keep an eye out for projects that can demonstrate shipping products and verifiable founders and the necessary business licenses and registrations within their jurisdictions. Those are the gems that you may find during your scouting and be able to acquire inexpensively on EtherDelta or similar exchanges like Decentrex which is another decentralized exchange looking to compete with EtherDelta.

Happy token hunting!

One Sheet

Mark Cenicola strips away the hype and gives his take on technology and its use in establishing a better business online.

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