Custodial vs Non-Custodial Crypto Swap: Which Offers the Best Exchange Rate?

If you’re planning to swap between cryptocurrencies, there is no shortage of options. Many people will use a centralized exchange such as Binance, but there are also non-custodial solutions such as Flyp.me. There are pros and cons to both models in terms of privacy, speed, and value for the money. The following review will focus solely on the latter, with a view to determining which exchange mechanism offers the best value for money.

Also read: Four Alternatives to Shapeshift

If You’re Regularly Swapping Between Cryptos, Know Your Options

When you’re cashing out into fiat, or swapping between cryptos, every satoshi counts. This is particularly true for freelancers who are paid monthly in cryptocurrency and then obliged to cash out a lump sum to cover living expenses. Some professionals who are paid in ETH, for instance, will immediately switch to BTC, before selling what they need to through Localbitcoins.com. For the purposes of this review, we’ll consider the exchange rate when swapping a small amount of ETH to BCH ($100) and a larger amount of ETH to BTC ($2,000).

The Small Swap

Bitcoin.com superhero t-shirt.

Our first fictional freelancer has been paid $100 in ETH, which equates to 0.49 ETH at the time of writing. They wish to swap to BCH so they can spend it on swag in the Bitcoin.com store. We’ll ignore the cost of sending ETH to a custodial or non-custodial exchange in each instance, as at around 4 cents, it’s negligible.

Performing the swap using Changelly will give you 0.23482 BCH. Performing the swap using Binance will give you 0.236 BCH (including Binance’s withdrawal fee).

In this example, the custodial exchange option will give you 0.00118 more BCH, which is a not inconsiderable $7.40. Pretty significant when you consider that you’re only swapping $100 of crypto.

The Large Swap

Our second fictional freelancer gets paid $4,000 in ETH a month and immediately transfers it into BTC, with a view to selling some P2P to cover living expenses. At the time of this review, $4,000 works out at 19.4 ETH. As before, we’ll ignore the negligible cost of sending ETH to a custodial or non-custodial exchange.

Flyp.me Performing the swap using Flyp.me will give you 0.62216883 BTC. Performing the swap using Binance will give you 0.630679 BTC (once the Binance withdrawal fee has been taken into account). Binance.

The Binance method gives 0.00851017 BTC, or $53.35 at current prices, more than Flyp.me. Over the course of a year, swapping $4,000 of ETH for BTC a month through a custodial exchange would save you $640.20. That’s not to say it’s the preferred option of course: many cryptocurrency owners would rather pay a little extra for the added privacy that comes from using a non-custodial service. (While Binance is one of the few centralized exchanges that doesn’t require KYC, it remains to be seen how long it is able to retain that model.)

Custodial or Non-Custodial?

The examples used in this review cannot be compared side by side, as they involve different non-custodial exchanges (Changelly and Flyp.me) and different destination currencies (BCH and BTC). Nevertheless, they demonstrate the sort of exchange rate to expect when agonizing over a custodial or non-custodial option. Binance clearly offers better value for money, but as a centralized exchange it comes with its own drawbacks. Given the additional wait incurred with custodial exchanges, which tend to process withdrawals in batches, there are clearly times when a non-custodial model will be superior. Know your options and always check the exchange rate being offered before you pull the trigger.

What’s your preferred option for swapping between cryptos? Let us know in the comments section below.

Images courtesy of Shutterstock Changelly, Binance, and Flyp.me.

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