Cryptocurrency trading has been trending for quite some time. However, what most ads don’t say is that there is no free lunch. If you’re not careful, you can easily lose money on fees and payments you’ve never heard of.
Crypto exchanges, popular platforms through which users perform actions such as staking, buying and selling, do not offer free services. Here are some of the different fees you may incur when using any of these platforms.
1. Maker and Taker Fees
Manufacturer charges apply when you place an order that has not yet been fulfilled. Usually this means more money for the exchange because instead of removing an order from the book by buying it at that price, you placed a new order in addition to the orders already in place. Basically, you didn’t put more money into the crypto exchange because you’re another person looking to buy, but because you created the order, rather than just buying assets that are already for sale.
A taker fee is charged when someone removes an order from the book. This happens when you buy an asset at a price that is already available on the exchange, rather than creating a new order at a price that differs from current market prices. The difference with a making order is that the taking order takes cash off the books without delivering anything new, so the exchange’s net profit is lower than if you had placed a new order at a price that is currently unavailable.
Some crypto exchanges charge no fees or lower maker fees to entice users to put money on the books because that’s how they make their profits.
2. Divide the costs
Exchanges that do not charge maker-taker fees may charge spread fees, which are determined by calculating the difference between the costs of different tokens. Depending on the tokens you are buying or selling, the spread fee refers to the amount you paid to buy or sell that particular token. Average spreads vary from exchange to exchange, but are generally around 0.5%. Although not very common, there are exchanges that charge maker, taker, and spread fees. Take the time to read the fine print and avoid exchanges that charge all three fees. Trading volume is one way to reduce fees. The lower the fees, the more your volume increases.
3. Gas costs
Gas fees are the transaction fees you pay to miners of a blockchain protocol to have your transactions included in the block. The “gas tax” system works according to a typical supply and demand mechanism. This makes it easy for miners to charge higher fees when more transactions are requested and to process transactions that pay higher fees faster and more efficiently.
Different blockchains charge different amounts as gas fees. Besides the Ethereum blockchain, other blockchains like Avalanche and Solana also charge significantly lower gas fees than what you would pay on the Ethereum blockchain. So you should choose a blockchain that charges reasonable fees. Digital wallets like MetaMask also allow users to interact directly with the Ethereum network and decide for themselves how much gas they want to pay.
4. Deposit and withdrawal fees
If you buy cryptocurrency on an exchange or borrow it from a crypto lending platform, or if you have accumulated a certain amount on a crypto platform, you may want to withdraw it at some point . Even if it’s your money, you can’t withdraw it for free. Most crypto exchanges charge fees for withdrawals. The amount of the withdrawal fee depends on the specific coin you are withdrawing and the size of your withdrawal.
Although rare, some exchanges may charge a fee for depositing cryptocurrencies into an account with them. The fees probably depend on the type of deposit.
Also note that some exchanges do not charge withdrawal fees for less popular or less valuable coins. Take the time to check if the coin you want to withdraw has a fee before you move your funds.
5. Staking Fees
Staking, where you deposit some of your money as collateral for the Proof of Stake or Proof of Delegated Stake and thus generate passive income, has become very popular. However, this service comes at a cost. The fees are deducted from your wagering rewards or earnings and not as an additional fee that you have to pay. Fees are almost always the same across the entire market, but may vary slightly on some exchanges like Binance which do not charge any fees.
Before starting to trade, any potential crypto trader or investor should carefully research the different types of fees. Take the time to do your research and save a significant amount of money by knowing which platforms offer the friendliest fees or none at all.
Tom is a longtime freelance writer specializing in the blockchain and cryptocurrency niche. He is a crypto enthusiast with over 10 years of experience in content creation, blogging and SEO. He believes that to improve our world, we must invest in incorruptible products and processes, of which Bitcoin and other cryptocurrencies are a good example.