What Is Poloniex?

Founded in early 2013, Poloniex emerged as an important and polarizing name in the world of digital asset exchanges, largely for its relationship with users and transaction security. However, in Dec. 2019, it shut down its services to U.S. users, though it’s still accessible by users outside the U.S.

Key Takeaways

  • Poloniex was, at one time, one of the major cryptocurrency exchanges in the world. 
  • However, after being purchased by Circle in 2018 and then spun out in 2019 its volume traded on the exchange has declined significantly.
  • Poloniex shut down access to U.S.-based users in Dec. 2019. 

Basics of Poloniex

Poloniex is a cryptocurrency exchange that allows for the buying or selling of digital assets, such as Bitcoin (BTC), Ethereum (ETH), TRON (TRX), and other altcoins. The exchange guarantees that users experience safety and security while transacting. As such, Poloniex ensures that the vast majority of customer deposits are stored offline in air-gapped cold storage. This minimizes risk and exposure to hackers and other threats online.

On Nov. 1, 2019, the exchange was spun out of Circle, and as part of the spinout, the exchange no longer supports U.S.-based users.

History of Poloniex

Poloniex was founded in 2013 and then hacked in 2014, losing over 12% of its customers' Bitcoin holdings. In the following years, various issues were raised. In 2017, for instance, rumors circulated among users that Poloniex was experiencing insolvency. It was reported that at least one user experienced a significant personal financial loss as a result of hacking, and the user reportedly did not receive prompt assistance from the Poloniex support department.

Other issues, including frozen accounts and disabled withdrawals, also fueled the insolvency rumors. The slowdown in customer support and reduced functionality suggested to some that the increased demand on Poloniex from a growing user base might have overwhelmed the system. 

In January 2018, Poloniex users reportedly experienced issues related to customer account balances on the exchange platform. Users suggested that the exchange was not properly crediting user account balances when those users canceled orders through Poloniex.

In October 2018, Poloniex stopped offering margin trading due to U.S. laws. In May 2019, the altcoin CLAM (CLAM), which traded on Poloniex, had a price crash and led to a large loss for margin lenders. 

In early 2020, Poloniex joined major exchange Binance in seeking to undo a soft fork of Steemit. The soft fork was done to limit the influence that TRON (TRON) had over the cryptocurrency. In June 2020, Poloniex was added as a defendant in a case against Bitfinex and Tether. The lawsuit claims Poloniex and other exchanges transferred among themselves Tether not fully backed by dollar deposits.

Circle Buyout

Poloniex was purchased by Circle, a digital asset and financial service company, in Feb. 2018. Then in Nov. 2019, Circle spun out Poloniex into a new company. The current Poloniex exchange is now owned by the entity Polo Digital Assets, Ltd., which is backed by an Asian investment agency. As part of the spin-out, Poloniex stopped supporting U.S.-based users, giving them until Dec. 15, 2019, to move their funds off the platform. 

How Is Poloniex Different From Binance?

Binance and Poloniex are both cryptocurrency exchanges. Binance is much larger, being the largest by volume among all exchanges. Both, however, have shut down operations in the U.S. 

Binance stopped servicing U.S.-based users in an effort to avoid complications with U.S. legislation. As of November 2020, Binance was aggressively looking to stop those in the U.S. from maintaining accounts or trading assets via the platform.

Poloniex Future Plans 

Justin Sun’s Tron, a blockchain-based decentralized platform, is an investor in Poloniex. Tron was part of the group that invested $100 million in the exchange ahead of its 2019 spin-out from Circle.

With Tron’s help, Poloniex is focused heavily on the decentralized finance space. Poloniex has launched an initial exchange offering (IEO) platform to help blockchain projects grow. The IEO platform, called LaunchBase, is in partnership with Tron. LaunchBase will help promote user adoption by offering tokens and professional advice.

An IEO, like an initial public offering (IPO), is a tool for cryptocurrency startups to raise capital. With an IEO an exchange acts as a partner to facilitate a token sale.

Poloniex was, at one point, a major exchange that facilitated a large part of crypto payments. However, at the time of its spin-out from Circle, the exchange’s total market value had fallen drastically.  

As of March 1, 2021, Poloniex was the 13th ranked cryptocurrency exchange by dollar-value volume, with $236 million in the previous 24-hour period. Meanwhile, Binance was number one with nearly $25 billion traded.