This is different from the anonymity of decentralized exchanges. The very nature of nested exchanges is to bypass identity checks. Nested Exchanges and Their Nefarious Purpose This is one of the glaring red flags users should be on the lookout for at all times. If you look closer, however, you’ll see the exchange is doing its best to hide the sources of these coins. The whole time you wouldn’t know this is what happens in the background. You send in the request and the nested exchange would take some of that Ethereum and obtain Solana on a host platform. The platform being used here is called the host.įor example, if you have an account with a nested exchange and want to trade some Ethereum for Solana. It would open an account on an official platform, usually a well-known one like Binance, then reflect its users’ actions and keep the commissions. Mechanically, a nested exchange operates on simple terms. It’s difficult to trace these activities and once you’ve engaged in one of these platforms, you may be categorically placed among bad actors. Money laundering is among many malicious activities conducted through the utility of nested exchanges. People who knowingly use nested exchanges often have other things in mind than simply trading. It is essentially a bridge between users and all of its accounts making them think they’re actually the ones doing all the trading. Nested exchanges are a middleman in cryptocurrency, except without their customers knowing.Ī nested exchange has accounts across some of the most popular crypto platforms and lets its customers trade with those accounts through its service. What makes having a middleman great is not just the efficiency but the mutual consent in the transaction. PayPal is a giant middleman in money transfer and a benchmark for today’s standards. When you need to transfer or receive money internationally, your bank would usually go through another platform connected to a bank in another country to get you the money you need. In the finance industry, middlemen are often seen in banking. Even everyday services like Uber are technically considered a middleman. Realtors are the middleman to your dream house. eBay is a middleman between you and the product you want to buy. It's a more common concept than we realize. Most of us are familiar with the middleman.
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