How Can Bitcoin Traders Avoid Taker Fees?
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The revolutionary brilliance of Bitcoin is found in the power of the peer-to-peer nature of blockchain technology. The chaos and cost of third-party intermediaries were effectively negated when Satoshi Nakamoto developed the digital community equivalent through the blockchain node system.
However, as with all brilliant ideas, the concept was quickly subsumed by the complexities of daily Bitcoin trading. Few, if any, knew the deep complexity of the network, which led to the rise of exchanges.
These exchanges, however, suffer from a lack of liquidity to fill orders. The need for market share and deep liquidity pools has led to a restructuring of fee systems in order to attract traders to their various markets.
How do crypto exchange trading fees work?
Exchanges that charge customers are nothing new in the financial world. In fact, with incredibly few exceptions, the entire financial world is composed of fee-based trading platforms. However, in the crypto world, fee structures are often designed to attract liquidity onto smaller exchanges.
What are Maker Fees and Taker Fees?
One way centralized crypto exchanges make money is through maker and taker fees. This structure is designed to draw in liquidity by offering ‘makers’—those who bring liquidity onto the exchange—fees paid by ‘takers’—those who buy and sell on the exchange.
Why were Maker and Taker Fees created?
The system was originally conceived in the traditional trading world, and has gained traction in the crypto world, as isolated and disconnected exchanges, both large and small, seek to attract liquidity in order to fill market orders. Because the crypto market is highly fragmented , these types of fee structures have been widely hailed as a means of gaining liquidity.
How are Taker Fees Distributed?
However, the fee variances can often be extreme. Liquidity providers (makers) are getting paid anywhere from 0 – 3 basis points while liquidity consumers (takers) are paying 0 – 50 basis points. The massive 50 basis point difference is entirely consumed by the centralized exchange.
Taker Fees and Asset Prices
The trouble with these fee structures is that they cause substantial price variances over markets. Takers on a given exchange may often find themselves paying prices for large scale trades that are very different from what are reported by the exchange.
Why is it hard to find the best asset price?
These dramatic price variances create substantial profits for the exchanges, but leave traders guessing at what price they are actually buying or selling an asset. Most traders make decisions based on relatively small price changes, and taker fees create a woeful lack of clarity for how to route trades.
What’s more, traders can often find it challenging to even correctly evaluate assets because of the market’s fragmentation. With ambiguity in pricing and substantial taker fees clouding the market, traders find themselves at a distinct disadvantage.
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How Do Decentralized Exchanges Share Fees with LPs
One of the first answers for these issues was the decentralized exchange (DEX for short). DEXs utilize a system called Automated Market Making (AMM) in order to bring together makers and takers in a more fluid, and less cost-prohibitive manner. Because of these benefits, this model has attracted the cryptocurrency community’s attention.
Can Decentralized Exchanges Improve Trading Experience?
While DEX’s have begun to provide some relief from high fees, they remain deeply lacking in liquidity, especially during turbulent market events. Further, DEXs are often accused of slow trade execution, large slippage, poor scalability, lack of privacy, high gas fees, and very poor compliance procedures (e.g., KYC/AML).
What is the Future for CEX’s and DEX’s?
The benefits of the centralized exchange, with speed of execution, scalability, and KYC/AML compliance rules in place, are helping move crypto assets into the mainstream. However, DEXs provide a better fee structure for takers, and offer more clear pricing for traders. Each offers benefits, but at great costs to traders.
How Can Traders Reduce Taker Fees?
Apifiny is creating a better, more robust trading platform by combining the best of centralized and decentralized trading into a new kind of hybrid exchange, or HEX. The HEX model is designed to remove price obscurity by charging “what you see is what you get” pricing (including zero taker fees and zero gas fees) while offering institutional-grade security and KYC/AML compliance.
What are Apifiny HEX’s advantages?
Further, Apifiny HEX is the only global trading platform where traders can place orders in a single, global order book that includes liquidity from leading centralized exchanges and from AMM.. This global system allows Apifiny to fulfill its vision of creating ‘one global trading marketplace of digital assets for a new era, the Internet of Value.’
For more information about Apifiny or HEX, please check out our website or contact us.
