DEFINITION of GDAX
Coinbase, the first licensed U.S. bitcoin exchange and one of the most popular, was founded in 2012 and has helped to bring digital currencies to investors both in the U.S. and abroad. Faced with massive growth in its user base and trading volume in 2015, Coinbase decided to expand its bitcoin offerings to include other digital currencies like ethereum. The company set up separate exchanges catered to individual or "casual" investors and highly active traders. The latter of these was eventually rebranded as GDAX, standing for Global Digital Asset Exchange.
BREAKING DOWN GDAX
GDAX is designed for the professional trader who is highly active. As opposed to Coinbase, which includes somewhat higher fees for trades, GDAX allows users to streamline trades and avoid incurring high fees. GDAX was previously known as Coinbase Exchange, but was renamed in 2016. This may still cause confusion for some potential Coinbase users. As of this writing, there are two different products associated with Coinbase: Coinbase itself is an exchange catering to consumers to facilitate easy transactions and to help store digital assets. GDAX, on the other hand, is for professionals.
Security is a major concern for all digital currency exchanges, and GDAX is no different. Considering that it focuses on a user base of professional traders, security is especially important. According to the GDAX website, the exchange is subject to regular IT security and financial audits. Some 98% of digital assets for customers are stored entirely offline in what is known as "cold storage," ensuring that those assets are protected in the best possible way from hacks and theft. Further, GDAX offers users the peace of mind that comes with working with an insured exchange. All USD balances on GDAX are covered by FDIC insurance, with a maximum coverage of up to $250,000 per customer.
GDAX presents itself as an exchange that enjoys high levels of trust from its users. One reason for this is the support that it has received from top investors like the New York Stock Exchange, venture capital firm Andreessen Horowitz, Union Square Ventures and others. Besides this, GDAX offers no fees on maker trades, as well as volume-based discounts for all taker fees. These fees can dip as low as 0.1% in some cases. Together, the combination of pricing and trust has encouraged massive growth among the GDAX user base.
GDAX also offers its users the benefit of the significant network of the Coinbase exchange. Coinbase users can easily sign up for a GDAX account without having to clear the same types of hurdles that most exchanges require. Further, individuals can transfer funds between GDAX and Coinbase accounts for free at any time.
As of this writing, GDAX is available to customers in the U.S. as well as several parts of Europe, Canada, Australia and Singapore. For customers in the U.S., available currency pairs include BTC/USD, ETH/USD, ETH/BTC, LTC/USD, and LTC/BTC. GDAX is not set up for transactions in a wide variety of digital currencies. At this point, the exchange offers BTC, BCH, ETH and LTC trades. Users looking to trade in more obscure altcoins may have to look elsewhere. However, because these four cryptocurrencies are some of the most popular (and most actively traded) digital currencies in the world, GDAX nonetheless enjoys high trading volumes.
GDAX operates on a maker-taker fee model. Orders generating liquidity (maker orders) are charged fees at a different rate than those which take liquidity (taker orders). As of now, GDAX sets maker fees at 0%. Taker fees can range from 0.1% to 0.3% depending upon the customer's trading volume for the previous 30 days. Further, cryptocurrency deposits and withdrawals can be done for free, and there are no fees for either maintaining a GDAX account or for holding funds in an account. Accounts can hold assets indefinitely and will not be closed as a result of user inactivity. By comparison, Coinbase users in the U.S. pay at least $0.15 per conversion fees, or a rate of 1.49%. By comparing these fees, it quickly becomes clear that users making frequent trades will likely prefer the fee structure associated with GDAX.
The world of digital currency exchanges is always changing. This happens for several reasons: Governments around the world have yet to completely settle on regulation for digital currencies. Beyond that, there are always new cryptocurrencies and digital currency exchanges on offer. With increasing competition created by the growing field, exchanges rely on reputation, trustworthiness, security, efficiency and other factors. GDAX has been able to capitalize on the strength of the Coinbase brand and name to become one of the most popular digital currency exchanges in the past several years. Users looking to make frequent trades for low fees may find that GDAX is an excellent option for their cryptocurrency transactions, particularly if they focus on the most popular names.
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.