Edit: Liquality Atomic Swaps are live for users to swap crypto p2p.

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Instant exchanges like Changelly, ShapeShift, and LocalBitcoins offer users convenience when swapping crypto across different blockchains. Their minimal sign-up requirements and relatively simple user experience make crypto exchange accessible to the masses.

Unfortunately, these types of exchange services often - knowingly or unknowingly - make false claims and put users’ funds at risk. Our goal for this article is to educate users on the real costs of using these services, including:

  • Having to trust the exchange to do the right thing
  • Privacy and data protection issues of PII
  • Hidden and additional fees

We then explain how Liquality atomic swaps are the most economical, private, and secure alternative to these services.

The Truth About Other “P2P” Instant Crypto Exchanges

Changelly

“Changelly is a non-custodial instant cryptocurrency exchange, which means that no users’ funds are placing in the service. Changelly acts as an intermediary between crypto exchanges and users, offering access to 150+ cryptocurrencies… The service doesn’t charge any hidden or unreasonable fees. There is only a fixed charge of 0.25% fee for crypto-to-crypto swaps, and that’s it.”

In their own words, Changelly acts as an intermediary and charges a 0.25% commission fee for crypto-to-crypto swaps. But from a user’s perspective, is Changelly really non-custodial? Are there really no hidden or unreasonable fees beyond the 0.25% commission fee?

To start a swap, Changelly first requires a user to deposit funds into specific addresses. Though it’s unclear whether those addresses are owned by Changelly, users clearly lose control over their funds. In return, users must trust Changelly to execute on their side of the swap.

But browsing forums like Trustpilot and Reddit reveals that Changelly often doesn’t hold up their end of the deal. Sometimes they impose stringent KYC requirements on users only after they have already deposited funds. This approval process can take several days or even weeks, and often leaves users feeling bait-and-switched. Users who don’t pass the KYC checks effectively lose their funds and have zero recourse. If Changelly can freeze and unfreeze users’ funds, are they really non-custodial?

Their 0.25% fee structure also appears false - users often complain about receiving less than the amount that they expect… by a big amount. How could users trust a service that isn’t upfront about the fees charged?

ShapeShift

“Trade Crypto for Free with FOX Tokens… As a non-custodial exchange, we don’t hold your deposits, so your funds are never vulnerable to hacks.”

ShapeShift was once an exciting instant exchange, optimizing for user privacy and freedom. Their stance on self-custody and user sovereignty is impressive, but since the service began implementing KYC in 2018, the crypto-to-crypto exchange has lost over 95% of its business.

Users must sign up and register with ShapeShift, giving up PII to pass KYC checks. Like the other instant exchanges, the crypto swap starts by the user first depositing funds into an address that the user doesn’t own - meaning that the user gives up control over their deposited funds. Again, the user is totally vulnerable and must trust ShapeShift to fulfil their end of the trade - as a user, you are sending funds to a black box, giving up control of your funds, and hoping that the black box gives you what you want.

Additionally, users must own and spend ShapeShift’s FOX tokens in order to trade on the platform. Though the “utility” token idea may seem attractive to users when they can earn FOX tokens during certain promotions, FOX tokens are an unnecessary cost that cause friction in the user experience and accounting overhead. For example, if you have ETH and want BTC, why should you have to buy and use another token to complete the swap?

LocalBitcoins

“LocalBitcoins.com is peer-to-peer, embracing the nature of bitcoin… Unlike centralized, stock-exchange-like, bitcoin trading sites, you make a trade directly with another person.”

One of the first bitcoin marketplaces, LocalBitcoins offers a compelling value proposition: users can swap crypto with other users while paying 0% network fees. But the catch is that users can only capture that benefit if they use wallets controlled by LocalBitcoins.

In effect, users don’t really own the keys to their bitcoins when using a LocalBitcoins wallet; those keys and those coins belong to LocalBitcoins. Furthermore, LocalBitcoins controls the escrows involved in each transaction.

So if LocalBitcoins has control over users’ bitcoins both at rest (in their wallets) and in transit (in their escrows), are users really swapping directly with other users? Google for “localbitcoins wallet frozen” and you can see how users’ funds were held hostage by LocalBitcoins on numerous occasions. Compound the issues of third party custody with unresponsive support and you can see why some LocalBitcoins users are so frustrated. Additionally, users who post offers are charged a 1% commission fee for every completed trade.

If you’re using a service that often controls your money, your trading partners’ money, and charges fees for both of you, then it can’t really be a peer-to-peer service; it’s a centralized middleman.

How Do Liquality Atomic Swaps Compare to Instant Exchanges?

A New Easy and Secure Way to Swap Cryptocurrency Across Blockchains, Peer-to-Peer

Hopefully, we’ve done a good job at explaining the hidden risks and costs of using centralized instant exchange services like the ones listed above:

  • Having to trust the exchange to do the right thing
  • Privacy and data protection issues of PII
  • Hidden and additional fees

Liquality is redefining what it means to enable truly non-custodial peer-to-peer crypto swaps. By focusing on security and eliminating the risks and costs highlighted above, Liquality offers users complete control throughout their swaps and assurance that their funds arrive as expected in an easy and secure way.

Rather than overcharging users with commission fees or “utility” tokens, Liquality atomic swaps only require that users pay network mining fees for their transactions. For example, if a user is swapping from BTC to ETH, then the user will pay a fee to Bitcoin miners to send BTC and another fee to Ethereum miners to receive ETH. Nothing else.

Rather than requiring users to sign up and register to transact, our software is free and open source. We aim to promote accessibility and avoid burdening users with unnecessary verification, “utility” tokens, or other special setup requirements. It’s clear that other companies aren’t able to protect their users’ sensitive information. Because our software is P2P and not controlled by a middleman, trading partners can use our software without the need to share personal information.

Rather than requiring users to deposit funds into addresses we control, we instead offer users a way to deposit funds into smart escrow contracts they fully control. These user-owned-and-deployed contracts make it impossible for a third party like us to access or control user funds. Users no longer have to worry about sending funds first.

Users don’t have to trust the Liquality team to do the right thing because the trade is entirely between the trading partners and Liquality is not in the middle - our atomic swap technology guarantees that the swap either executes successfully or both parties are refunded. As Satoshi said, “transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers,” and that’s what we’ve built. If you’d like to learn more about these smart contracts and our security architecture, feel free to read our explainers on atomic swaps and hash time locked contracts (HTLCs).

Liquality atomic swaps offer the best of instant exchanges and delivers on the promise of truly P2P transactions:

  • Simple And Free: No account sign-ups, deposits, "utility" tokens, wrapped tokens, or other complicated setup requirements. And we do not add any fees to your trades.
  • Cross-Chain: Effortlessly trade Bitcoin and Ethereum-based tokens (ETH, DAI, and USDC).
  • Trustless Security: Our atomic swaps enable direct and risk-free trade with partners, eliminating the need for costly exchange services that are preferred targets for hackers.
  • Full Control: Our tech gets transaction permissions from wallets* that you control. Only you have access to the assets you place in a trade. *We support Ledger and MetaMask

Through peer-to-peer atomic swaps, pseudonymous users can securely swap cryptocurrency in a non-custodial way, without the risks and costs associated with a trusted third party.

To swap crypto in a more economical, private, and secure way, check out our youtube tutorial and use Liquality atomic swaps and let us know what you think on Telegram or Twitter!