If you have been familiar with the cryptocurrency industry, then chances are that you must have heard of Coinbase. Coinbase is one of many cryptocurrency exchanges that deal in these digital assets and bring them to the everyday user to hold and to trade afterwards.
However, the Coinbase name gets to have a certain distinction to it.
This is because over its years of operation, the exchange has become one of the most popular entities when it comes to the world of cryptocurrency.
It is mostly due to how Coinbase makes cryptocurrency trading accessible to the everyday user and provides them with never seen before ease of buying and selling cryptocurrencies. The company facilitates this through a user-friendly app that has now become the standard for bringing cryptocurrency trading to the masses.
However, while Coinbase provides these solutions to non-technical traders who are transacting in cryptocurrency easily through its original brand of “Coinbase”, it also caters to experts.
Coinbase understood that there were several market segments that they were providing services to and sought to offer value in the best way possible.
They did by this by addressing the needs of the technically knowledgeable individual and industry level traders that deal in personal as well as business transactions for cryptocurrencies through its other solution called “GDAX”.
While many guides and introductions have been written for Coinbase as an entity, it is difficult to find information or a comprehensive review on the web for GDAX. This may mostly be because it gets overshadowed by Coinbase.
However, while GDAX largely remains an answer to cryptocurrency trading at the professional level, it offers features and benefits that deserve a mention – especially when they can provide immense benefits to individual traders as well.
Therefore, let’s go ahead and learn a thing or two about GDAX, including its history, its source of operations, its functions and the benefits that it could provide to its customers.
History of GDAX
The Global Digital Assets Exchange (GDAX) was created in May 2016 out of the original Coinbase by Brian Armstrong and Fred Ehrsam, citing a need for a professional trading platform for what was then a slightly obscure industry.
When Armstrong and Ehrsam founded Coinbase in July 2011, they aimed to create a platform where people who did not have any technical knowledge of the workings of cryptocurrencies and were not familiar with their underlying blockchain technology could still buy, sell and utilize Bitcoin as the “electronic cash” that it was meant to be.
Finding initial backers in investment entities such as Y Combinator, Coinbase soon found itself receiving the “biggest funding for a Bitcoin startup” when it accepted $5 million in seed funding from Union Square Ventures in 2013. It truly was a one of a kind investment amount at the time for a cryptocurrency business.
It was only a year later that Coinbase grew to have 1 million users and also got to establish itself as a credible entity by forming alliances with firms such as Dell, Time Inc., and Overstock.com to power their Bitcoin payment solutions.
While the Coinbase platform had started out a bit slow due to lack of awareness and the stigma that cryptocurrencies had at the time, it still continued to progress and stick to their vision. These developments coupled with massive investments from the likes of the New York Stock Exchange soon helped Armstrong and Ehrsam realize that the industry had much more to achieve than what it had at the time.
So, the decision to purportedly split the original Coinbase into two individual segments came to fruition.
That led to the company focus on Coinbase as a front-end user solution which made cryptocurrency trading easier with the help of an app and a built in wallet; while GDAX was introduced as a more advanced trading solution.
This advanced trading solutions was created for individuals and corporations that did not mind additional technicalities while fulfilling their requirements of trading cryptocurrencies.
However, to be technically correct, both products use the same backend processes of the GDAX system.
And that leads to learning more about what GDAX does.
What is the Difference Between Coinbase and GDAX?
To make it simple: you may think of this as GDAX being the machinery that powers Coinbase’s retail offerings, while the machinery allows GDAX to sell the same products at warehouse prices on its own.
Users just need to make a choice whether they will go through the comfort of a store shopping experience or get into the puzzling environment of the warehouse.
For instance, review this identical chart of cryptocurrency support from Coinbase and GDAX.
Despite their limited set of cryptocurrency offerings, what sets both Coinbase and GDAX apart from other exchanges is their reach and accessibility in the U.S.
Both exchange products are available throughout the U.S. except for the States of Wyoming, Hawaii, and Minnesota.
This alone makes GDAX and Coinbase – to which what we can now safely refer to as GDAX’s front-end product – the most sought after trading solutions. Since it is difficult for a cryptocurrency exchange to even enter the U.S. market in the first place, much less to establish a credible name for itself.
When it comes to trading solutions, Coinbase brings ease of use to the table where it provides a simple to use interface to the end-user through its mobile app.
Users at Coinbase can buy and sell cryptocurrencies without getting into any technicalities. It is hassle-free for users and effective for Coinbase.
While the non-technical users enjoy the world of cryptocurrencies through their smartphone, Coinbase does not only get to grow its user base, but also earns a higher fee – which could be justified, as no one else provides such effective solutions in the industry.
On the other hand, GDAX brings about more technical options for its users. It does not mean that the interface is highly intricate or that you need two computer science degrees to operate it, no. What it means is that it is just a bit more detailed than the Coinbase app.
GDAX users can still perform the same functions as they do on the Coinbase app where they buy and sell cryptocurrencies, but here they have to go through additional options and can actually utilize more technical services. This of course means lower fees for the user, and for professional traders and corporations.
The technical aspects also translates to more options for trading such as order books and limit orders, as well as a trading view.
How Does Trading on GDAX Work?
Trading at GDAX is comprised of market, limit and stop orders. These orders are placed on the exchange’s order books.
A market order means that you are trying to buy or sell at the current market price, right away. When you place such an order, it happens on a “current price” basis. However, since buy orders could be placed before sell orders for the same amount, sometimes “slippage” could occur in the desired order amount where buy orders could go for a higher price and sell orders execute at a lower one.
A limit order means that you are looking for a “price match” order. Here, you specify a limit for your order to be met, and if the market price reaches that specified value, it will be fulfilled by someone’s market order.
A stop order means that you are looking to have your order executed when a certain price is matched. They are like limit orders in this sense, but they mainly look for selling at a higher price or buying at a lower price.
The smallest order which can be placed for buying or selling on the GDAX platform is 0.001 BTC, 0.01 ETH, or 0.1 LTC.
All these orders are executed through the maker-trader model.
To define that model simply, you are a maker when you add liquidity to a market. For instance, when you place a limit order and contribute to the order books, you are adding to the market liquidity. This gets you to be a “maker”.
On the other hand, you are a “taker” when you place a market order or stop order that is immediately fulfilled due to the availability of the other orders. Here, you are taking liquidity off the market and are thus branded a “taker”.
Once the orders that you set on GDAX get to be executed, you are termed to be either a maker or a taker and charged a fee accordingly (or none at all – seriously, we are not kidding).
What is the Fee Structure at GDAX?
As stated above, we are completely serious when we tell you that one of the main segments does not have to pay any transaction fee.
And that is when you are a “maker”.
While the maker fee is not charged at all, the taker fee itself is way lower than what you would pay at Coinbase.
And this is really noticeable when you look at Coinbase’s fee structure.
We can also compare prices with exchanges that draw a direct parallel to GDAX’s services, such as Kraken.
As highlighted above, the Kraken exchange does not waive its maker fee until a trading volume greater than 10 million, whereas GDAX does that right from the start.
How to Sign Up With GDAX?
GDAX is currently available in the following countries:
- United States
- United Kingdom
- Czech Republic
- San Marino
The availability of trading pairs by region is defined below.
If you already use Coinbase, then it might help you to know that the accounts on Coinbase and GDAX are interconnected.
Therefore, if you are already a Coinbase customer, you can sign-in using the same login credentials that you have set up at Coinbase, and transfer your balances to and from your Coinbase wallet to your GDAX account seamlessly.
On the other hand, if you have not used Coinbase before, you can still use GDAX services as usual (but it is recommended that you have both accounts if you want to switch between ease of use and low fees).
To start trading at GDAX, needless to say, you need to create an account and complete a few verification procedures. Since it is an advanced trading platform, it might need additional verification from your end as compared to your level of access at Coinbase.
For instance, if you are a U.S. citizen, you would need to provide documentation for ID verification as well as your residential address and Social Security Number (SSN).
In the other countries where GDAX provides its services, proof of identification is needed along with a few other requirements that have to be completed. The complete list can be seen here.
Once you have completed the verification requirements and your account is functional, you can go ahead with depositing fiat or cryptocurrencies into your GDAX account. Then the fun begins, you are ready to start trading with access to the aforementioned set of functionalities.
Again, if you are a Coinbase customer, then you can do seamless transfers between your Coinbase and GDAX accounts.
It is prudent to mention here that there are no limits for deposits, whether they are in fiat or cryptocurrency.
However, there is a daily limit on withdrawals: $10,000 for individual accounts and $50,000 for institutional accounts.
In case that limit is not sufficient enough for you, then you can request GDAX to increase your limit and the exchange will look into your request.
How to Deposit or Withdraw Funds on GDAX?
As for wait times on deposits, they directly depend upon how soon the cryptocurrency network confirms the transactions.
According to GDAX, deposit transactions for Bitcoin can take up to 30 minutes to get completed, whereas for Ethereum, Bitcoin Cash and Litecoin, the estimated time gets to be around 12, 10 and 30 minutes, respectively.
Fiat deposits, on the other hand, can take some time.
Unlike Coinbase, GDAX does not entertain deposits from credit cards or PayPal.
Customers from the U.S. can transfer USD from their bank account to GDAX using ACH transfers. The process can take 3-5 business days to complete. There are no charges for deposits using this method.
However, for faster execution of deposits, U.S. based customers can avail same day wire transfers, where the amount gets deposited to their GDAX account in the same day (if the transaction is performed by 2 PM). The charges for this method are $10.
Customers in the Europe can use SEPA transfers to deposit EUR into their GDAX account (GBP deposits are not being entertained by the exchange at press time). The process takes 1-3 business days to complete and the charges for it are €0.15.
When it comes to withdrawals, they follow the same completion time for cryptocurrencies.
The same is the case for USD withdrawals. If done through ACH, they take the same amount of time. Wire withdrawals can be entertained at a fee of $25.
For EUR withdrawals, the fee remains the same which is €0.15, while the timeframe changes to 1-2 business days.
How Safe is GDAX?
GDAX follows stringent safety measures when it comes to ensuring and maintaining the security of funds that it holds for its customers.
This includes maintaining 98 percent of all held digital assets to be stored in offline storage to make sure that they remain safe from hacking attempts.
The exchange is also covered by Federal Deposit Insurance Corporation (FDIC) where it has implemented insurance coverage of $250,000 for each customer in case of any unforeseen event.
In addition to this, GDAX holds all fiat that belongs to its customers either in special segregated accounts that are created for them or in custodial accounts (for U.S. customers, it means U.S. Treasuries).
With it, GDAX ensures to implement top level security and safety precautions to ensure that it remains one of the most reliable solutions to hold and maintain digital assets for its customers.
However, that did not stop a non-security related but still unfortunate incident from happening in 2017.
GDAX Ethereum Flash Crash
Until June 2017, GDAX used to offer margin trading, where it allowed customers to place orders for amounts which they would not normally be able to afford.
The whole structure of margin trading can become a rather risky proposition. In the margin trading model, customers can open a position with leverage, where they can have their actual assets increased by a certain percentage as allowed by the broker or exchange platform.
Depending on the leverage, customers can earn large amounts if they are able to sell high, where a certain percentage of the profit goes back to the broker or exchange, and the customers gets to keep the remainder of the amount.
The remainder amount is one which they would not be able to achieve if they had not taken the risk and used the margin trading service.
On the other hand, if the order executes at a loss, then customers can essentially lose all of what they have due to what’s at stake for them.
The same thing had happened with the customers of GDAX.
On June 21, 2017, GDAX saw a multimillion dollar sell order placed on the order books for the ETH/USD trading pair.
In a cascading effect, the order resulted in disruption through the market where it triggered a slippage of more than 29 percent that actually led to Ether falling to $13 for a brief moment – demonstrating a flash crash.
The unforeseen event then translated into margin call and stop loss orders being executed for customers who were dealing in the trading pair, commencing immense losses throughout the segment.
The situation was bad to the say the least, while the customers had been aware of the risks while buying on margin, the result here was completely unprecedented. This caused emotions to run high since the affected customers had nowhere to go.
While GDAX immediately stopped Ether trading on the platform to investigate the issue, it assured its users that the system had acted properly and what happened had not been due to its fault.
But seeing just how frustrated its customers were and the amount of losses that had incurred, GDAX then announced that it will be reimbursing the affected customers for the losses.
That being said, the exchange still maintained that the system had acted how it was supposed to and what happened had not been due to the system’s culpability.
While the customers were satisfied afterward, the issue raised a lot of questions on GDAX’s margin trading functionalities, and as a result, the exchange stopped offering the service altogether.
But it Has Been Smooth Sailing for GDAX Otherwise
Despite the aforementioned issue, GDAX has proven to be an otherwise positive experience for its customers so far.
The platform also provides its trading API to other traders and developers to help them achieve their respective goals using the exchange’s technology.
Apart from this, GDAX has itself implemented a few crucial updates along the way with its more popular product, Coinbase.
One such crucial updates remains to be Segregated Witness (SegWit) for Bitcoin, which allows the transactions related to the prime cryptocurrency to be performed faster and with a lower transaction fee to the network.
The updated was implemented as recently as February 2018, starting on February 21.
Since GDAX remains to be Coinbase’s main exchange, it would not be incorrect to state that the platform will always get to see updates right around the same time as the front-end product.
GDAX is Far More Economical than Coinbase
It is also not incorrect to state that GDAX transactions get to be more affordable for the customers as compared to Coinbase.
As shown above, the 4 percent fee that Coinbase charges its customers for ease of use remains justified due to how easy it makes the process of buying and selling cryptocurrencies.
When you get to see how it is not at all applied at GDAX and how unchallenging it is to understand its intricate system, then this is the moment you realize that spending that much on platform fees just to use Coinbase’s app might not be a good idea – especially when you were technical enough to understand how GDAX works.
Furthermore, by using GDAX, customers can actually make life easier for themselves.
As you might be aware, most of the new but popular cryptocurrencies are not readily available to be purchased through fiat on other exchanges and only use Bitcoin trading pairs, which makes it incredibly difficult to get a hold of them.
While it is not possible to buy them directly from GDAX since the exchange only deals in the four cryptocurrencies that we mentioned above, you can implement a so-called lifehack in such situations to leverage GDAX’s benefits to your advantage.
Example Transactions Using GDAX
Transfer the required amount of fiat to your GDAX account using bank transfer. If you are a U.S. citizen and do not want to wait for a few days for the deposit to go through, then you can also use same day wire transfer for $10.
Go ahead and purchase your Bitcoin from GDAX using the fiat that you have in your account.
Transfer the purchased Bitcoin to the other exchange’s address from where you want to purchase the cryptocurrency not available on GDAX.
Once you have your newly purchased Bitcoin transferred from GDAX to the desired exchange’s address which deals in more cryptocurrencies, you can use the Bitcoin trading pairs there to buy the new cryptocurrency of your choice.
With the low fee that you get from GDAX, you can ensure that you get to purchase Bitcoin at a low price to shop from other exchanges.
Should I Switch From Coinbase to GDAX?
There is no reason to make a complete switch.
You can continue using Coinbase for any urgent fiat deposits through credit card, but you can purchase or trade in cryptocurrencies through GDAX to avoid higher transaction fee from Coinbase only because you are using its app.
The interface that GDAX provides is not too difficult to understand.
If you have the know-how to operate a computer or understand mildly technical terms, as we explained above, then you should be fine.
You may do your own research and see if the platform is comfortable and suits your individual needs.
At the end of the day, it is your choice whether you would be more relaxed in paying a higher fee to Coinbase while getting an easier more intuitive interface, or if you would be more content in working with a slightly more complex system at GDAX while enjoying lower transaction fees as a result.
All in all, they are both different sides of the same coin. It is just that one of them is a bit shinier, with other one still being as valuable.