Spotlight on Poloniex: Simplex - Poloniex's Entry Point for Fiats

Challenge entry:

Simplex - Poloniex's entry point for fiats

Since inception, Poloniex has been famed for being a strictly crypto-crypto exchange, with over 130 cryptocurrencies listed but no fiats. It started out as a completely crypto-crypto exchange and was a haven for crypto traders who didn't border about fiats or who had other means to buy cryptocurrencies with fiat. For new crypto investors however, Poloniex was already seeming too advanced by not supporting fiats.

In this post, we take a tour of Poloniex from it's origins to the point where Simplex became involved and after.

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Poloniex origins

Poloniex, one of the most popular crypto exchanges, was founded in 2014 by Tristan D'Agosto as a digital asset trading service. On Poloniex, users could transact different digital currencies. Thus, it was a crypto exchange. It had a peculiarity however, it was designed for only digital currency to digital currency exchange. Users could only transact digital currencies on Poloniex. The platform didn't support credit or debit cards or other popular payments system. This required any new crypto investor to first use another exchange to acquire a digital currency then transfer it to Poloniex for trading.

Poloniex as a purely digital currencies exchange didn't do badly. They had one of the highest altcoins trading volume owing to the fact that they had lots of altcoins listed. Poloniex currently offers about 170 assets and about 347 markets. It has been ranked among the top exchanges due to it's high trade volume which is currently around $56M as at today. During it's glory days, Poloniex trade volume reached $1.65bn highlighting it's popularity even as a pure crypto-crypto exchange.

However, on scrutinizing Poloniex all time trade volume history and juxtaposing it with the timeline of major exchanges, we see a disadvantage suffered by the platform because it was purely crypto to crypto. Observe Poloniex all time trading history as charted below

^{Poloniex all time trading volume}

_{Image credit: nomics}

Observe that Poloniex enjoyed it's glory days between June 2017 and February 2018 during which period it peaked at $1.65bn. Also, it was a period that began to see more and more people round the world become interested in crypto leading to an increase in the number of trades generally. Fortunately for Poloniex, most other popular exchanges where either none existent or just starting out at that time.

Let's list out some rival exchanges with the highest markets and study their trade volume to see how Poloniex was disadvantaged as a result of not accepting fiats.

It is worthy of note that all these exchanges listed above are rated A by nomics for their transparency. However, there seem to be a rush to those exchanges that offer fiat currencies and it's not difficult to see why.

Although one might make mention of the fact that Poloniex encountered some issues in the US and had to relocate their headquarters outside of the US, even shutting down some operations in the US. However, the fact that Binance did not even start in the US and has a separate variant for the US - Binance US with limited features, derides any mention of Poloniex legislative struggles. Binance has also been hit by legislation and has had to move it's servers and headquarters around looking for a favourable base. This has not stopped binance from currently recording $13bn+ in trade volume over the past 24hours.

Now, it was only in late 2017 that Binance, which has now become another leading crypto exchange, began. It is worthy of note that Binance, an exchange with asian roots, supports fiat in addition to the numerous crypto they offer. Closely observe the daily trade volume chart of Binance below.

^{Binance all time trading volume}

_{Image credit: nomics}

You can make a case for the number of currencies and markets they offer being more than that of Poloniex but don't forget that many of those markets are fiat-crypto pairs. Poloniex enjoyed it's glory days in late 2017 and early 2018 most probably because of the numerous altcoins it offers. After that period however, Binance who had matched Poloniex altcoins list size was now beginning to gain an upper hand because, wait for it, it offered...9 fiat currencies including USD, EUR, GBP, BRL & NGN. These few countries whose fiats are listed on Binance are more than significant and it has helped shoot Binance daily trade volume to above $13bn.

Partnering Simplex

In October 2019, Poloniex's then parent company Circle, spun it out to an Asian backed consortium. They also began moving out of the US then and the new owners needed to come up with some rescue strategies to preserve Poloniex from going down and out. One of the investors, Justin Sun, had this to say after it was acquired by the Asian backed consotium

“Poloniex is one of the biggest exchanges in our industry. I think the exchange is going to grow and that’s why we collaborate with it to have more initiatives. Those initiatives include listing Tron’s tokens on Poloniex and an airdrop campaign of USDT and TRX20 for users on the platform in the next few weeks". source

It turned out that that wasn't the only thing they did (not that they said it was going to be). They went ahead to woo Chinese users by creating a new domain for them - pwang.com and also accepting Chinese government issued IDs for Know-Your-Customer protocols.

It didn't stop at the Chinese. On March 9 2020, Poloniex made a big announcement via it's twitter handle.

Together with @SimplexCC we’ve added more support for buying #bitcoin!
You can now buy $BTC on #Poloniex with your credit or debit card using USD, EUR, AUD, CAD, CHF, CZK, DKK, GBP, HUF, ILS, JPY, KRW, NOK, NZD, PLN, RUB, SEK, TRY, and ZAR
Twitter link: https://twitter.com/Poloniex/status/1237088069670580226?s=20
— Poloniex Exchange (@Poloniex) March 9, 2020

The new Asian owners didn't understand how Poloniex would still be among the top, despite shifting from the US to the global market, without fiat. They recognized that not being able to buy crypto in one's local currency was a big problem in mainstream crypto trading. So they decided to introduce fiat currencies to their platform through partnering Simplex. With Simplex, Poloniex now supports buying and selling crypto with up to 49 fiat currencies including USD, EUR, AUD, CAD, BRL, NGN and ZAR.

Seems like Poloniex is trying to turn the tables on their rivals. To do that however, they'll still have to come through the competition in today's crypto exchange industry. So far, this is how Poloniex have fared in daily trade volumes.

^{Poloniex daily trading volume since partnering Simplex}

_{Image credit: nomics}

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Using Simplex on Poloniex

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Using Simplex on Poloniex is all to easy. Simply log into your account on Poloniex and click on either Buy with fiat or Sell for fiat on the upper right corner (if you're using a pc).

Then you fill in the amount you want to buy and the currency you want to buy with, just like I did here.

If you've done just like I did, the Buy now button should change its background color to dark green implying that it is clickable. Click on it after you have confirmed the figures you entered. Then you see a page like this.

Then enter your card details accordingly and don't forget to check that you have read and agreed to the terms and conditions and policies. Then click on Next. That should take you to a page like this

Enter you billing address and personal details and then click on Pay Now. You'll get a pop-up asking you to verify email you provided. The pop-up looks like this

Check the email you provided, a code will be sent to it. Enter the code into the field provided. If it's correct, you'll also be asked to verify the mobile number you provided with another pop-up that looks like this

After that, simplex verifies your card and you'll see something like this while that is going on

Once that is done, you'll have to verify yourself before being able to complete your purchase. Simplex claims that they are legally obligated to verify your identity before you can make a purchase. You'll get a page that looks like this.

After filling out the fields and uploading the document you'll get a pop-up telling you that your file was being uploaded. It looks like this

After that, there's another pop-up telling you that your payments was being authorized. It looks like this.

Simplex charges a 3.5% or $10 fee per transaction, whichever is greater. It also has a minimun purchase amount of $50 (or its equivalent). For maximum purchase amounts, daily is $20,000 (or its equivalent) and monthly is $50,000 (or its equivalent). If you're buying for the first time, the transaction may take some time to verify your id, else, it shoud only take a few minutes. Once the transaction is approved, the crypto is procured and sent on-chain to your Poloniex deposit address. Normally, your procurred coin should arrive your account within an hour if network conditions are not so bad.

Now Simplex system doesn't support fraudulent transactions and that's why you'll have to go through this lengthy process. If there's any discrepancy, your transaction won't go through.

Selling for fiat requires you having a Simplex bank account. If you don't have, you might want to transfer to another exchange.

In any case you don't see the Buy with fiat or Sell for fiat buttons, it could be because of any of these

1. Your Poloniex account might be frozen
2. You don't have at least level 1 verification on Poloniex.
3. You're in an unsupported location. The locations supported by Simplex are listed here

Simplex quotes its prices from a liquidity providing partner. The price is maintained for a period of time. However, if while you are transacting, there's a significant increase in price, you might have to reconfirm your transaction or start it all over again.

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Conclusion

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My opinion on Poloniex partnering Simplex is that they are trialling the inclusion of fiats on their platform. If this works so well, there is a possibilty that we might see Poloniex list fiat currencies on their platform. For now thoough, Simplex remains Poloniex gateway to fiats or Poloniex entry point for fiat. Simplex also provides Poloniex with a secure form of purchasing crypto with fiat. Through this partnership and by adding more fiat currencies to their platform, Poloniex stands to gain more patronage globally.