How does instant exchanges work?

[nhnkl159]

Hey guys,

Lately, i saw a lot of instant exchanges on announcements, for example:

https://sideshift.ai/
https://exch.cx/
https://changenow.io/

NOTE: I didn't try those services, so I don't know if they work!


I wondered how they are working, like the process from receiving the payment to exchanging and sending the exchanged crypto.

I'm assuming they are using some other exchange API, for example, Binance or KuCoin or CoinBase or whatever. I'm not looking to create a new one lol but just curious about how they are working since i cant understand how everything is connected lol.

[DaveF]

Some operate by themselves others are just doing back end API calls to other exchanges and passing the information and taking a cut and others are just linking to other ones through a white label API service.
 
pnnv.com just did it for their site: https://bitcointalk.org/index.php?topic=5427902.0

There are others out there that talk about doing it.

At times it has been discussed that it's a 'real' exchange doing it under another name just without a nice front end and with a bit worse rates.
But it makes it quick and simple for users so you are paying for that.

-Dave

[NeuroticFish]

I wondered how they are working, like the process from receiving the payment to exchanging and sending the exchanged crypto.

Let's say you want to exchange between BTC and ETH (the default at changenow).

My guess would be:
* They have in their wallets some BTC and ETH. They also have at a certain (or more than one) exchange some coins - both ETH and BTC.
* When your bitcoins were sent and the required confirmations have passed, their system will:
   1. Exchange that amount (maybe minus some fees) at the exchange
   2. Send you (from their wallets, not from exchange's) the promised amount.

At a later point, they will "equalize" the funds by transferring to/from exchange as needed.


But this is my guess. What they actually do there, I don't know.

[dkbit98]

I wondered how they are working, like the process from receiving the payment to exchanging and sending the exchanged crypto.

They are not all working the same way, but most of them are just using third party centralized exchanges and I would be very careful using services like that with larger amount of coins.
From my research exch.cx looks ok, they don't use any third parties, they have live reserves show on their website and they claim they can prove that if asked.
Most important thing to look with all this instant exchanges is to read their terms and stay away from anything that can ask for kyc verification and seize your coins if you don't provide what they asked.

I'm assuming they are using some other exchange API, for example, Binance or KuCoin or CoinBase or whatever. I'm not looking to create a new one lol but just curious about how they are working since i cant understand how everything is connected lol.

Some of them are using big centralized exchanges and they and they don't hold any funds.
You will have to ask support for each of this exchange for more details and see what they tell you about this.

[bitmover]

At times it has been discussed that it's a 'real' exchange doing it under another name just without a nice front end and with a bit worse rates.
But it makes it quick and simple for users so you are paying for that.

But there are some nice use cases for those services. I have used them a lot in the paste.

• Not all of them have KYC for low amounts, so you can make some anonymous transactions.
• No withdrawal fees. So, again, for low amounts, they are cheaper even with worse rates.
• Fast and easy to use. Exchanges are a lot more complicated, you need to login, create account, password, kyc, etc...

I used them a lot when I joined a signature campaign of an altcoin here. I just swapped my earning every week. The rates were ok for me, and no withdrawal fees.

[hugeblack]

I wondered how they are working, like the process from receiving the payment to exchanging and sending the exchanged crypto.

But this is my guess. What they actually do there, I don't know.

These central platforms and this work requires that there be a management to monitor assets and forecast cash flows, which requires more work, but most of the current platforms are lazy, they do it through API calls.
In any case, they will not tell you the truth, just as these platforms should have a reserve if any hacks occur, which is something I do not think exists.

[PX-Z]

I wondered how they are working, like the process from receiving the payment to exchanging and sending the exchanged crypto.

Steps on using this kind of exchange is simply just 1,2,3. Everything that can be seen on the screen are just as it is, like:
- entered the amount
- choose coin you have ^{(the one you will send later)}
- choose coin you want to receive or "exchange"
- click "next" or "proceed" or "exchange" button or anything they use
- then it will generate a receiving address where you will send the coins that you have. Sometimes it shows there the total coin you will receive after the exchange, the fees they take, the average/recommended fees you will use to transfer.
There are some helpful videos on how to use these instant exchange actually, just use google.

About the process, there's no exact answer unless they will show their backend source code process. Jut simply follow the steps above and understand it. It all works with webhooks and api. The page displays on when you entered amounts are the trigger of these. It will start after you send the exact coin/amount and token/coin to the receiving address, after confirmation, their system will trigger that it receives the exact amount then process the sending of the chosen coin to be received. Of course those coins listed they have to be sent/exchange have enough balance on their own hot wallet or else you will receive an error after you entered high amount.

[examplens]

Let's say you want to exchange between BTC and ETH (the default at changenow).

My guess would be:
* They have in their wallets some BTC and ETH. They also have at a certain (or more than one) exchange some coins - both ETH and BTC.
* When your bitcoins were sent and the required confirmations have passed, their system will:
   1. Exchange that amount (maybe minus some fees) at the exchange
   2. Send you (from their wallets, not from exchange's) the promised amount.

At a later point, they will "equalize" the funds by transferring to/from exchange as needed.


But this is my guess. What they actually do there, I don't know.

and for me, this scenario is the most logical, but I think he requires a large number of reserves, which is difficult for many exchangers.
I saw this as an important parameter of the BestChange monitoring service.