Categories
Help buying Bitcoin

Kraken

The History of the Kraken Exchange

In 2011, a security breach at the offices of an infamous, now-defunct cryptocurrency exchange (Mt. Gox , for those interested) prompted a visit from Jesse Powell, who was at the time the CEO and co-founder of Lewt, Inc., a company that worked on digital currencies within the video-games industry (an industry which has suffered more than its fair share of major hacks in recent years).

krakenscreenshot

Impressed and inspired by the set-up, and believing he could adopt a similar approach of his own (one that would give a greater focus to security aspects) Mr. Powell began working on Kraken, thinking that perhaps it could replace the gap left by Mt. Gox were they ever to permanently close, which at the time seemed a safe prediction.

In September 2013, months before Mt. Gox collapsed, Kraken launched after a solid two years of testing and development.

By July that same year, Powell and Kraken had cemented themselves as an emerging player in the burgeoning digital currency industry, along the way helping form the Committee for the Establishment of DATA (the Digital Asset Transfer Authority).

In March 2014, Kraken received a $5 million Series A investment led by Hummingbird Ventures, with other investors including Trace Mayer and Barry Silbert (of the Bitcoin Opportunity Fund), and in April (2014) became one of the first crypto exchanges to be listed on Bloomberg Terminal.

Most recently, in 2019 and 2020 respectively, Kraken received $13.5 million from 2,263 individual investors via a special-purpose vehicle and was granted a special purpose depository institution (SPDI) charter, becoming the first cryptocurrency exchange to hold such a charter in the United States.

The Pros

While arguably slightly less well known than their peers, Kraken was in fact launched just two years after the Bitcoin itself, and have been staking a name for themselves in the highly competitive cryptocurrency exchange market ever since.

Admittedly the oldest isn’t always apposite to the best but the securest often is, and Kraken have created a platform with market leading security. Over the years, cryptocurrencies have proven particularly vulnerable to hacks resulting in millions of dollars in lost coins – and Kraken goal from its very formation was to stem the flow of these losses and provide more comprehensive satisfaction to their customers.

This has led to Kraken ranking first on multiple crypto-exchange security sites online, even posting a perfect score on CER. In fact, Kraken has not had any major hacking events in its entire 10-year history, which is a claim that cannot even be made by international industry mainstay, Binance.

These days Kraken offer more than 60 coins to choose from and the ability to “stake” (loan) out your crypto-assets in return for the possibility of financial reward (though all at a price point on the low side of average, of course).

You will also find some useful guides on their website, such as this handy guide for beginners on how to buy Bitcoin.

And while some might consider Kraken an overly pricey foray into the world of all matters crypto-related (with many critics slating its Instant Buy platform for this exact reason), the ease and speed with which it can be used is often a major attraction for users, particularly less-savvy first timers.

Most user types (Kraken has four) let you get started in minutes via a process of automatic verification, though the highest tier (Pro) can take several days as it requires certain documents be reviewed manually.

Once you’re verified, you can fund your account with fiat currency, such as U.S. dollars, and start purchasing cryptocurrencies – and though most competitive crypto sites allow this, especially these days, those that have not still require users to buy their crypto elsewhere to make purchases.

Additionally, more sophisticated investors will likely be impressed with multiple of Krakens offering in their sector; as it offers access to margin trading and other forms of more complex strategic investment that remain attractive to the full time crypto-head.

The Cons

Like many crypto exchanges, Kraken uses a maker and taker fee model as its primary directive. Essentially, this means you get a lower fee rate if you add liquidity to the market instead of taking it away, although you will in return sacrifice certain flexibility.

Maker fees are applied when an investor puts in a trade order that is not immediately matched with an order already on the books. This is known as a “maker” because it is making demand for more cryptocurrency.

Taker fees are applied when the investor’s order is matched with an order already on the books. This is reducing liquidity because it takes an already existing coin off the market, which is why it is called a “taker” fee.

Outside of these, there are multiple different fees for using Kraken’s Instant Buy option, which may appeal to beginners less experienced with maker/taker models.

While true to its eponym—Instant Buy allows you to easily buy their digital currency, quickly—it is at a much higher cost than if you used the Kraken trading platform, and you’d almost certainly be better served learning how to use the trading platform to minimize costs.

More recently Kraken have launched an app which is being well received.

Simply put, Kraken is not the best site for beginners; as it ultimately offers a sophisticated trading platform for users with some type of crypto-management mileage below their proverbial belt.

There are however such a wealth of options and alternatives that it could potentially bewilder a would-be first time user. Perhaps their new app will change this.

Check out Kraken here.