Executive Summary – eToroX Exchange
ADVANTAGES
① eToroX exchange has a relatively solid team and ecosystem construction. Core team members’ backgrounds are professional and they have more than 8 years of experience in the finance and blockchain industry.
② eToroX exchange has complete security measures, and is under a strict regulation with a license from Gibraltar.
③ eToroX is a part of eToro Group, which has been operating 13 years in the traditional financial industry and has a good reputation.
④ eToroX’s fee schedule is unique and a default 0.05% fee structure is attractive to low-volume trading users.
CHALLENGES
① eToroX’s liquidity can be improved for some trading pairs, and its user base needs to be expanded to bring more liquidity.
② Some features such as drawing tools can be added to enhance the design of the trading page and improve the users’ trading experience.
OUTLOOKS
eToroX is strictly regulated under the GFSC, providing a market advantage in compliance and regulation. Based on its complete security measures and eToro’s reputation, eToroX would grow to be a popular crypto-assets trading platform which is known for its trading security if more users are joining in.
SUMMARY
In summary, TokenInsight gave eToroX exchange a rating of BB with a stable outlook.
1. INTRO
1.1 eToroX
eToroX is an eToro’s digital asset and a crypto exchange. eToroX was established in April 2019 and registered in Gibraltar. The exchange currently supports spot, leveraged, and OTC trading. eToroX aims to provide professional and institutional-grade crypto trading product suite for professional traders and institutes.
The platform currently offers 111 trading pairs on the spot market and 31 digital assets with 16 tokenized stablecoins that were developed in-house by eToroX Labs. As it looks to the future, eToroX is exploring the potential of several more innovative projects, including staking and DeFi.
The exchange’s distributed ledger technology (DLT) is licensed and regulated by the Gibraltar Financial Services Commission under the Investments and Financial Fiduciary Services Act.
1.2 eToro
Founded in 2007 and based in Israel, eToro is an online social trading platform and multi-asset brokerage company offering financial and copy-trading services. According to eToro, It has more than 13 million users over 140 countries. In 2018, the company started marching into cryptocurrencies markets in U.S. by providing an online foreign-exchange platform for U.S. residents.
2. TEAM & ECOSYSTEM CONSTRUCTION
2.1 Core Team
2.2 Ecosystem Construction
eToroX, as a cryptocurrency exchange, is a part of eToro’s crypto ecosystem. At present, the system basically contains a crypto trading platform, a blockchain innovation unit, a cryptocurrency exchange, a digital crypto wallet and a crypto tracker called Delta.
Comparatively, eToro’s interior ecological system is complete and well constructed. eToroX could take advantage of eToro’s resources to support its goal of playing a professional service platform role for senior investors. Details for each unit are shown below.
Among these units, eToro and eToroX are at a relatively mature stage. For other units, there still are spaces to improve in terms of platform interactions and sociability. The whole construction is expected to be more mature and stable when wider adoption and increase in users are seen.
3. FEATURES & SECURITY
3.1 Stablecoins
“eToroX offers more stablecoin choices than most of the exchanges in the market”
Providing a variety of stablecoins is an important feature of eToroX. eToroX used to provide USD stablecoin USDEX, but recently it has removed the USDEX and substituted it to direct USD fat tradings with other cryptocurrencies and other fat-backed stablecoins. Besides, except for the stablecoins pegged to the gold or silver, which are commonly seen in the market, eToroX offers many other stablecoins that pegged to Euro, Japanese Yen, Chinese Yuan and more. There are 16 stablecoins in total and below is a list for the stablecoins eToroX currently offers.
Among all the stablecoins, USDEX used to indicate the entrance of eToroX into the stablecoin market. Along with GOLDX and SLVX, the three stablecoins were developed with an intention to establish the eToro brand in the stablecoin market. Other stablecoins were designed to provide a trace of price and fill in the users’ needs.
The stablecoins are currently only tradable on eToroX, but as disclosed by eToroX, collaborations with other exchanges are on the way to enable the trading of eToroX’s stablecoins in other platforms.
3.2 Innovations
eToroX introduces its innovations in four parts, including tokenization, staking, DeFi, and Universal Basic Income (UBI) project GoodDollar, which is an external project that eToroX partially contributed to. Tokenization is the process of creating a digital representation of a given asset on the blockchain. In the case of eToroX, stablecoins were developed.
According to eToroX, it has been conducting research on Proof-of-Stake mechanism and a staking program will be launched in the near future. eToroX’s DeFi focus its analysis on how DeFi concepts can provide new opportunities for its users and researches to develop in-house applications that integrate DeFi to existing services. Also, a programming language called “Lira” was developed to allows investors to compose and deploy financial contracts to the blockchain. Compared to other exchanges that emphasize the listings of DeFi tokens and promoting finance products with yield farming features, eToroX’s strategy in integrating DeFi is more conservative and mainly focusing on the tech support.
In summary, for the four innovation areas mentioned by eToroX, stablecoins were already in the market and have been used by clients while contributions from eToroX have been seen in UBI project GoodDollar. The staking program and DeFi are more in a research and development phase with some signs of progress already achieved.
3.3 Cybersecurity & Others
eToroX designed its own cybersecurity program to perform the following five core cybersecurity functions: identify, protect, detect, respond, and recover.
eToroX offers a cold storage Custody as a Service (CaaS) solution, in partnership with GK8, a leading provider of military-grade cybersecurity solutions. eToroX CaaS solution is based on a three-level, military-grade FIPS140 custodian process, with multiple separations between the environments, and is already in operation.
As for Anti-Money Laundering (AML) compliance, eToroX combines cyber threat intelligence capabilities with AML compliance technology provided by top tier experts.
In addition, as disclosed by eToroX, it built its own development backlog analytic mechanism based on N.N machine learning algorithm that assists decision making. All data is encrypted as default and eToroX uses a secured mechanism to prevent CSRF attacks. Meanwhile, employee & role-based workstations are protected and verified based on multiple security mechanisms that include deception & traps. As for human resource management, employees are required to pass security clearance as part of the hiring process. The detailed descriptions for physical security methods are rarely seen among exchanges in the market.
Overall, eToroX’s provides a comprehensive security system that covers a wide range of aspects from data information to physical identities. Compared to most exchanges, eToroX adopts stronger control to secure crypto assets.
3.4 Account Security
As for Know Your Customer (KYC), according to eToroX exchange terms & conditions, the account verification required government-issued ID, phone number verification, and proof of address. Meanwhile, updating financial account information requires a dual-process verification.
eToroX claims that the 2 Factor Authentication (2FA) it uses access sensitive environments only from separate authenticated and authorized environments. Login 2FA can be managed on account settings, and users can choose to set the operational 2FA to become required for both depositing and withdrawing if additional security is needed.
3.5 Legal
eToro uploaded a number of legal documents on its official and the legal documents for eToroX were covered. Terms and conditions were clearly stated in the legal documents to inform clients about the risks and their responsibilities when using the trading platform.
4. REGULATORY
4.1 eToroX – Gibraltar Regulation
eToroX’s distributed ledger technology (DLT) is licensed and regulated by the Gibraltar Financial Services Commission under the Investments and Financial Fiduciary Services Act with a license number of FSC1333B.
Aiming to support the growth in the Fintech sector, the Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) established a set of regulations for distributed ledger technology (DLT) that came into effect in January 2018. This framework requires that the GFSC authorize all businesses working with DLT while encouraging growth and innovation in the industry to make the growth safer for both businesses and consumers.
GFSC established nine core principles designed to support DLT market regulations. Each of them has detailed guidance notes that clarify responsibilities and requirements for licensed DLT providers. For instance, according to GFSC’s Protection of Clients Assets and Money Guidance note, GFSC requires DLT providers to nominate one of its directors or senior management as being primarily responsible for customer assets and notify the GFSC of such appointment.
Currently, many exchanges in the market usually applying existing traditional finance legislation and are supervised by jurisdictions of their registered country. If more similar strict and prudential regulatory frameworks are provided by relevant institutes, the security and transparency of the blockchain industry will be enhanced.
In conclusion, compared to most exchanges, eToroX is operating under a regulatory framework that has a relatively good reputation. Under this mechanism, with the goal to build a healthy crypto-financial regulatory ecosystem, crypto-assets investors’ interests are protected more accurately, scientifically, and effectively.
5. TARGET CLIENTS
eToroX’s targeted clients are divided into individual and corporate entities. Users have the choice to sign up with an individual or a corporate account when first using the platform.
5.1 Liquidity Analysis
Liquidity Analysis is conducted in order to see whether eToroX has enough market depth to satisfy its target clients. TokenInsight Research collects eToroX’s XLMUSD and EURXUSD spot market depth through eToroX’s API. The data shows that the depth of the eToroX’s XLMUSD from a randomly selected period of time is less than $100 thousand while the depth of EURXUSD reached up to $2.3 million.
The depth for different trading pairs varied significantly and the depth for EURXUSD has been experiencing a relatively large fluctuation. Although the depth of EURXUSD can meet the need of most of the individual clients, the performance of eToroX’s liquidity can be improved for certain pairs and the depth can be maintained more steadily for EURUSD.
eToroX adopts credit line and special order features to satisfy the need of different clients.
5.2 Credit Line
Credit line program was available for spot trading to provide users with additional liquidity. As disclosed by eToroX, the difference between a credit line program from the traditional leverage trading is that the credit line is applied to the user account rather than the trading positions.
And thus, the credit line program is on a case-by-case basis, requiring the users to request a credit line by approaching the eToroX team. The eToroX team would review the user’s request and ask for collaterals to grant the credit line. Such review process before granting the credit indicates a strong control of risks, and enables eToroX to provide different users with targeted solutions.
The minimum deposit for a credit line is $10k and the credit line is up to more than 10 times.
5.3 Trading Strategy
Special orders are a variety of trading strategy provided by eToroX to satisfy the needs of different clients. There are 7 varied order types including market orders, limit orders, Fill-or-Kill (FOK), Immediate-orCancel (IOC), Good-Til-Canceled (GTC), Good-Till-Date (GTD), and Iceberg orders, providing conveniency to users. At present, except FOK and Iceberg, all other strategies are on services.
Market orders and limit orders are common types of orders among exchanges. Orders are executed at the best available price and a specific price for market orders and limit orders respectively. Details of other types of orders are shown below.
6. FIAT & FEE COMPARISON
“USD can be directly deposited and withdrawn between banks and the eToroX platform”
eToroX is one of the few exchanges in the whole market that allows direct transfers of fat between the banks and the platform. eToroX currently collaborates with the Signature Bank to provide the fat deposit and withdrawal service. There is no fee charged for deposits on eToroX platform but the minimum deposit amount is 10k USD for fat transactions.
This aims to satisfy the Anti-Money Laundry (AML) requirements, and in line with the market target that aims at professional and corporation traders. There is a withdrawal fee varied by the types of currencies. The withdrawal limit for one day is also 10k USD, any amount exceeded will need the approval that takes 24 hours or 72 hours on weekdays or over weekends respectively.
Currently, exchanges rarely charge a deposit fee but most of the exchanges do charge a crypto withdrawal fee, and depending on the ways of withdrawal, fat withdrawal fee also varies. Below is the comparison of the withdrawal fee and withdrawal limits between different exchanges. Overall, the withdrawal fee charged by eToroX is reasonable, the amount of withdrawal limit is friendly to new users, and the way eToroX applies the withdrawal limit indicates the control of risks. However, compared with some other exchanges, the way eToroX presents its information for fees could be more organized.
6.1 Trading Fees
Unlike most of the other exchanges that adopt a tiers fee model, eToroX charges a default 0.05% fees for both maker and taker without a tiers system when trading volume is less than $1 million. It also adopts the inverted maker-taker model for its fees. Unlike other exchanges charging the taker more than the maker, the model pays a rebate of 0.01% for takers who trade more than one million USD monthly, or in other words, charges a lower fee for removing liquidity from the market.
Compared with other major exchanges who use tiers approaches, eToroX offers a fixed fee package with some flexibility. The 0.05% trading fee for both maker and taker is low and competitive among regulated exchanges when the trading volume is less than $1 million. For example, as the figures shown in the above, both Bitstamp and Kraken charge more than 0.05% when trading volume is below $1 million.
For users with large trading volume, the 0.01% rebate for takers will be applied and thus the trading fees are also lower than the industry average. But there are still some exchanges like Bitstamp and Kraken that offer no maker fee for users who have really high monthly transaction volume. However, according to eToroX, they are also flexible and open to negotiation about fees for commercial needs. Such negotiation strategy matches the needs of eToroX’s target audiences who are professional and corporation traders.
Overall, the fee schedule provided by eToroX is attractive to users with relatively lower monthly transaction volume, and the $10,000/day withdrawal limit can satisfy most of the new individual users.
7. USER EXPERIENCE
eToroX constantly makes updates on its Medium platform, Reddit, Twitter, LinkedIn and Telegram to disclose major achievements, news, and other posts to promote its services and educate the market. It currently provides a yearly report to summarize the periodic progress, compared to other exchanges that provide monthly or quarterly reports, the frequency of such periodic updates is lower. In addition, users can access some information for eToroX exclusively from eToro’s news and analysis page by clicking the tags or topics that show the keywords of crypto exchange.
In terms of customer service, users can get support from eToroX by email. eToroX will respond with an automatic reply immediately but there is no indication of when will users get a formal reply.
However, eToroX does provide a separate support page that educates users of the basic knowledge of the platform and provides information such as the withdrawal of crypto assets, the deposit of fat currency, and other transaction process operations, so that users can familiarize themselves with the trading operations.
In terms of language selection, the eToroX trading platform supports 7 languages including English, Russian, French, Chinese, etc, providing a reasonable multilingual support.
7.1 Trading Operation
eToroX trading dashboard provides comprehensive trading information. Different from some other exchanges like Binance and Coinbase, the instruments list, market view, and candle chart view of eToroX are all displayed on one page. There are 7 types of Candle Charts including bars, candles, lines, etc, and the Candle Charts can be viewed in minutes, hours, days, and weeks, totaling 12 options.
The number of technical indicators is adequate, however, the drop-down list of indicators always returns to show the first 6 options when scrolling down. In addition, eToroX provides a relatively user-friendly function called ”compare” to allow users to place the price of multiple pairs in one trading page. However, the drawing tools are not available.
Meanwhile, when using the trading page, users can easily switch between the trading dashboard, the fund page and the support page by clicking respective buttons. The fund page lists all the crypto assets available on the platform, allowing users to easily check the balance, make deposit or withdrawal.
Overall, the platform covers a variety of functions in terms of trading operation but there is still room for improvements on actual user experience.
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