What Is Copy Trading?

Copy trading is a strategy that allows investors to replicate the trades of experienced traders, automating their investment approach without needing advanced technical knowledge. There are two primary types of copy trading: on-chain copy trading and exchange-based copy trading.

While both methods help traders leverage expert strategies, they have fundamental differences in security, transparency, cost, and profitability. Understanding these distinctions is crucial for optimizing returns in the highly volatile crypto market.

What Is On-Chain Copy Trading?

On-chain copy trading refers to automatically copying trades directly on a blockchain, without relying on centralized exchanges. This approach uses smart contracts to track and mirror transactions executed by profitable wallets, providing full transparency and decentralized execution.

Key Features of On-Chain Copy Trading:

• ✅ Transparency: Every transaction is publicly recorded on the blockchain.
• ✅ Non-Custodial: Users retain full control of their assets.
• ✅ Decentralized Execution: No reliance on centralized exchanges or third parties.
• ✅ Access to Smart Money Trades: Ability to track and follow whale wallets, insider traders, and profitable DeFi strategies.

What Is Exchange Copy Trading?

Exchange-based copy trading occurs within a centralized crypto exchange (CEX) such as Binance, Bybit, or eToro. Users can select professional traders and automatically execute their trades through the exchange’s copy trading interface.

Key Features of Exchange Copy Trading:

• ✅ User-Friendly Interface: Easier to set up, especially for beginners.
• ✅ Built-in Risk Management Tools: Some exchanges offer stop-loss settings.
• ✅ Centralized Execution: All transactions occur within the exchange’s ecosystem.
• ✅ Limited Transparency: Users cannot fully verify trader strategies or wallet movements.

On-Chain Copy Trading vs. Exchange Copy Trading: Key Differences

Feature	On-Chain Copy Trading	Exchange Copy Trading
Transparency	✅ Fully transparent (blockchain-based)	❌ Limited transparency (exchange controls data)
Security	✅ Non-custodial, funds remain in user wallets	❌ Custodial, exchange holds funds
Trade Execution	✅ Smart contract automation	❌ Manual or exchange-managed execution
Fees	✅ Lower and transparent	❌ Trading fees + platform commissions
Availability	✅ Supports multiple DEXs & chains	❌ Restricted to exchange-listed assets
Risk of Centralization	✅ No third-party risk	❌ Subject to exchange policies & restrictions

Why On-Chain Copy Trading Is More Profitable

🔥 Lower Fees

• On-chain copy trading bypasses centralized exchange fees, often only requiring network gas fees, which are significantly lower on Solana.
• In contrast, CEX copy trading includes platform fees, commission costs, and potential withdrawal fees.

🔥 Real-Time Execution & No Delays

• Exchange copy trading often has execution delays due to order book slippage and latency.
• On-chain transactions are executed instantly when the copied wallet makes a trade, ensuring better entry points.

🔥 Access to Smart Money & Whale Trades

• Platforms like GmGn.ai enable users to track and copy trades from insider wallets, DeFi power users, and top-performing traders.
• Exchange copy trading limits users to a curated list of pre-approved traders, missing out on true market leaders.

🔥 No Centralized Risks

• With on-chain copy trading, users retain full custody of their funds, avoiding risks associated with centralized exchanges (CEX hacks, withdrawal restrictions, or account freezes).

When to Use Exchange Copy Trading Instead

While on-chain copy trading offers more profit potential, security, and transparency, exchange copy trading may be preferable for:

• Beginners: Easier to set up without requiring blockchain knowledge.
• Users trading on leverage: Most on-chain platforms don’t support leveraged trading.
• Those who prefer pre-vetted traders: CEXs often screen copy traders before listing them.

Final Verdict: Which One Should You Choose?

If you want full control, lower fees, real-time execution, and access to the best-performing traders on-chain, on-chain copy trading is the better option.

However, if you prioritize ease of use, built-in risk management, and access to leverage, exchange copy trading may be more suitable.

Regardless of the method chosen, copy trading offers a powerful way to automate investments, enabling traders to leverage expert strategies without the need for deep market knowledge.