Summary

Poloniex is a US-based cryptocurrency exchange offering a wide variety of alternative currencies for trade. It is often a top five liquidity provider for altcoins that trade against bitcoin, and offers particularly good liquidity for a number of crosses.

The Poloniex executive level is kept anonymous and users from across the globe – outside of the states New York, New Hampshire, and Washington – can trade, though they have begun to require KYC details.  Any of that turn you off?  Check out Binance.

Security

Like most exchanges, Poloniex offers two factor authorization to secure login and authorize withdrawals. Additionally, email verification is offered for withdrawals, meaning that requests must be backed up by both the email and telephone associated with an account. Poloniex claims that “majority” of user funds are kept in cold storage, and that the “exchange is continually audited and inspected for unusual activity”.

In March 2014, just two months after launch, a user exploited a vulnerability in Poloniex’s withdrawal approval code and was able to steal 12.3% of the exchange’s bitcoin, approximately $50,000. The hacker discovered faulty logic in which instantaneous withdrawal requests would actually all be transferred, resulting in a negative balance (which of course would never be paid back). This was a relatively easy vulnerability to fix – by placing withdrawals in a queue to be paid one by one, integrity is assured.

According to owner Tristan D’Agosta, additional security measures were quickly put in place: “Since the hack, we implemented continual automatic auditing of the entire exchange, bolstered the security of all servers, and redesigned the way commands are processed so that an exploit like the one used in March is impossible.”

Gravitas

The Poloniex exchange was unable to absorb the loss. According to a forum post immediately following the attack, Mr. D’Agosta stated “If I had the money to cover the entire debt right now, I would cover it in a heartbeat. I simply don’t, and I can’t just pull it out of thin air”. Instead, the stolen amount – 12.3% – was deducted temporarily from all customer accounts. The fee was raised, again temporarily, from .2 to 1.5% until the additional funds were raised. The balances were restored a little less than two months later, in the beginning of July, and the regular fee schedule was restored.

On the one hand, Mr. D’Agosta handled the affair extremely well. He immediately went public with the incident, explained exactly what had happened, why it happened, and outlined the steps taken to ensure it would not happen again. Close to a year later there have been no additional incidents, so until now his approach has been vindicated. The community was very supportive, and applauded his forthrightness and approach.

On the other hand, the fact that the exchange was unable to absorb a 12.3% breach was illustrative of severe reserve deficiencies and a lack of adequate financial backing. While the exchange was just launched and thus unable to build adequate reserves organically, there has been no evidence that such a reserve has since been built.

Opening an account

As trades are limited to cryptocurrencies, Poloniex benefits from an extremely simple registration process, absent the KYC/AML requirements found at fiat/crypto exchanges. Simply input your email, create a password, and click the box proving you are not a robot, and you are a member in good standing.

Software review

The trading screen is very smart. Pride of place is reserved for a large chart offering multiple time frames, candlesticks in increments from 5 minutes to 1-day, and the ability to add bollinger bands and fib levels. Most impressive is that it covers all the ~200 pairs on offer. When a particular trading pair is selected, the chart quickly loads, and the order books, displayed across the bottom, switch to show the relevant buy and sell orders. There are buy and sell orders, as well as limit and take profit, and these all can be used on any desired pair.

There are three main markets featured by Poloniex – Bitcoin, Monero (XMR) and Tether (USDT). Each market is displayed in it’s own box on the right-hand side of the platform, with all the cross pairs listed beneath. We are particularly pleased to see Tether, which we view as offering substantial innovation to the market, achieving enough liquidity to be listed as its own market. As of April 2015, Poloniex seems to account for close to 100% of Tether’s trading volume.

There are a few user friendly features of note – users are able to mark their top altcoin markets and limit display only to these favorites. Like btc-e, there is a troll box, but it seems relatively tame and users can be ignored, which is a nice function. Within the trade history page is a nifty trade analysis feature, in which a user can look at historical profit loss per each particular currency pair traded. Additionally, users are notified by a prominent alert as to any important information, such as coin delistings.

The “My Balances” screen offers users the ability to generate a wallet for any altcoin with one click, which can then be funded. Withdrawing is just as simple – input the destination wallet address, specify the amount, and click “withdraw”.

Mobile

There is no app, and the design is not responsive. While you could make a trade in a pinch, it will literally require a lot of screen pinching and repositioning. Not recommended for those with fat fingers.

You Might be Better off with a different exchange if:

You need to deposit or withdraw in fiat.  

Poloniex is crypto only, so buying your favorite new ICO shitcoin will require you to buy bitcoin at an exchange, transfer the bitcoin to poloniex, trade there for the shitcoin, and then send it to your external wallet.  Exchanges like Bitfinex have a number of different cryptos available against USD, which simplifies your process.

You would like to trade some of the main cryptos with leverage.

You can trade much higher leverages on both the spot and futures markets at Bitmex and for a fraction of the fees, though there are only about a dozen cryptos available.

Bottom Line

Were Poloniex to integrate a proper mobile product, it would rate higher.  As it is, desktop users, Poloniex’s product and fees warrant consideration.