Avoiding Big Mistakes on EtherDelta: A Cautionary Tale

As a follow-up to our How to Use EtherDelta piece, we wanted to expand on the challenges associated with using the exchange. The reason for this is simple: EtherDelta is extremely unforgiving of mistakes and we don’t want people to lose money through carelessness when using it.

A recent Reddit post entitled “Just lost my entire bankroll – tough lesson learnt” caught our attention. In the post, a redditor using the moniker Goatcoin11 provides a screenshot highlighting a mistake he had made when trading on EtherDelta.

The mistake was trading at a rate of 5,000 Ether for 1 Powr. For anyone unclear on why this is a mistake, here is the current exchange rate:

At the time, it was around 1 ETH/5,000 PWR.

Goatcoin11 mistakenly traded his total holding of 6.1 ETH for a tiny fraction of one PWR. What he did was swap the two values and the transaction went through because EtherDelta does not have any foolproof safeguards in place to protect people from erroneous orders or typos. There are also bots on ED that are specifically designed to capitalize on mistakes such as this.

As soon as the order was placed, it was snapped up. It didn’t matter that it didn’t match any other orders. According to another commenter, “I do a lot of trading on ED and I see this happen multiple times a day – usually by the same 2-3 bots.”

While some expressed shock that the platform would allow this to happen, others offered condolences and a few wondered how the poster could have confirmed such a mistake.

Enter Goatcoin11

We tracked down Goatcoin11 to commiserate and learn more about the incident, with the hope of preventing others from suffering the same fate.

Q: Can you give a bit more context as to how this mistake occurred? Was it simply a matter of being unfocused? Going too quickly? Not double checking?

A: I wanted to move my ETH to EtherDelta to buy WABI. So I got my ETH from all of the exchanges in preparation for it.

The token unlock was delayed by a few days and I saw POWR was at a decent price. I had a look at the orders, and copied and pasted it into the first field (on other exchanges, price is first). I then edited this price because I wanted to put an order in, in case it dipped further. I played around with it, and I was happy with the total ETH spent (6.1 ETH which was my entire bankroll at the time).

I submitted the trade, a box came up and said “this order is below market” (I assumed this was normal because my order was below market), and then had another look at the order. I tried to cancel it but it was too late, it had gone through at 5,000 ETH/1 PWR.

Q.You mentioned already being aware of this danger. If this awareness didn’t help you, how can others avoid the same mistake?

A: I have seen this happen on Reddit before, and it still happened to me. My advice would be to triple-check your order (I double-checked and it still happened to me) or avoid ED entirely. The mechanics of this exchange are not customer-friendly.

Q. Did you try to contact ED? Have you received any donations? Having no obvious recourse must be very frustrating. How will this affect your investing/trading process with crypto going forward? Will you continue to use ED?

A: I have, but they did not respond. I was lucky enough to receive some donations from the community (~0.3 ETH). Invest money you are willing to lose, that was my mantra when I started.

It’s frustrating that I lost 6.1 ETH, but it was 6.1 ETH not 61 ETH. It’s a costly mistake; however, it could have been a lot more costly if I make the mistake 1 year down the track. I believe there are more opportunities out there, and I will likely use ED in the future (if I have to).

Q. Anything else you want to add?

A: Reflection and perspective are important. I’m glad that I am giving these responses one month after the incident as it has given me time to reflect. Mistakes happen; learn from them and teach others. Don’t be embarrassed to admit to a mistake. The more you talk about it, the easier it is to accept.

Final Thoughts

Since Goatcoin11 was willing to be open about his mistake and go through an informal AMA of sorts, we’ve all now gotten a bit more insight into what not to do. If nothing else, it’s a great reminder for caution when trading on exchanges.

Based on the number of people on the thread who thought he had lost 5,000 ETH or said, “man, I’ve done similar!”, it’s obvious that Goatcoin11 is not the first (or probably last) to have this happen.

There are still many arguments for ED to be made — access to coins, low fees, a link with Ledger Nano S and taxes primary among them. And while this exchange remains popular, it’s worth taking this cautionary tale to heart. A day will come when crypto tools and interfaces are better, but until then there is the risk of being burned.