Cryptocurrency trading is not free. However, being aware of these fees will ensure that you do not lose more than you expect the next time you trade your cryptocurrency.
If you own cryptocurrency, you've most likely used an exchange or something similar at least once or twice. Such platforms are extremely popular and useful, allowing people to perform actions such as buying, selling, and staking their money. However, most crypto platforms are not free to use, and there are a variety of fees you may encounter if you use one. So, what are the most common cryptocurrency fees that you might encounter?
A maker-taker fee system is used by many large crypto platforms, particularly exchanges. Maker fees are a type of exchange fee that, as the name implies, are charged to platform creators. A maker typically places an order in an order book that will be filled by someone else later, rather than immediately. In a nutshell, they "create" the marketplace for other traders. As a result, makers are the best users an exchange can have because they provide liquidity to the platform.
In this case, liquidity refers to the ability of a crypto coin to be converted into traditional currencies such as USD or GBP. It is the bread and butter of an exchange that allows them to make a profit. Maker fees are often lower than taker fees because crypto exchanges favour makers, though some exchanges keep both the same.
Binance, Bittrex, and Coinbase Pro, for example, keep maker and taker fees equal, whereas other major exchanges like Bitfinex and Kraken charge a higher taker fee (though the difference isn't usually that significant).
Takers, as opposed to makers, remove liquidity from an exchange platform (which the exchange does not want). A taker will take an order from an order book, consuming or removing the liquidity that was previously offered. When a user places an order, it is instantly matched by another order in the order book.
As previously stated, exchange platforms prefer makers over takers. Because takers remove liquidity, a platform is far more likely to charge them a higher fee for their transaction.
Spread fees are frequently charged by exchanges that do not use the maker-taker fee structure. A spread fee is calculated by calculating the difference between the cost of a token, such as BTC or ETH, and the amount a user paid to buy or sell it. The average spread rate varies by exchange, but it is usually around 0.5 percent.
Some cryptocurrency exchanges, however, charge maker, taker, and spread fees. While this isn't very common, if you don't know which fees your chosen exchange charges, you could end up paying a hefty sum in fees. Swyftx and Coinbase are two prime examples of this. There are, however, a plethora of exchanges that only charge maker/taker or spread fees, so you won't be short of options if you want to avoid platforms that charge all three.
Gas fees are most commonly associated with the Ethereum blockchain, but this blockchain covers a wide range of cryptos and services, so you may encounter gas fees if you use it.
A gas fee is charged to users to compensate for the computing power required to process and validate transactions on the Ethereum blockchain. It essentially compensates the provider for the energy required to keep everything running on the blockchain. Running a blockchain as large as Ethereum necessitates massive amounts of computing power, so it stands to reason that users should contribute a small portion of the cost.
There are several scenarios in which you may be charged for gas. For example, if you want to use an Ethereum-based exchange or lending platform, such as Uniswap or Aave, you may have to pay a gas fee for transactions made in your name.
However, gas fees are not limited to the Ethereum blockchain. Other networks, such as Solana and Avalanche, have gas fees as well, though they are significantly lower than those charged by Ethereum. This is a major issue for Ethereum, and many people are put off using platforms built on this blockchain due to the high gas fees (which can amount to hundreds of dollars for just one transaction).
5. Fees for Withdrawal and Deposit
If you buy cryptocurrency on an exchange, borrow it on a lending platform, or build a crypto fund on any other platform, you may want to withdraw it. And, while you may believe that removing your own funds is always free on most platforms, this isn't always the case. Some large exchanges, such as Gate.io, CEX.io, and KuCoin, will usually charge you a fee for withdrawing cryptocurrency, though the amount of this fee is frequently dependent on the type of cryptocurrency you're withdrawing.
It's worth noting that some coins (typically those that are less popular and valuable) are free to withdraw on platforms that charge withdrawal fees. Before transferring funds, you should check to see if the coin you want to withdraw has a fee. If you want to avoid withdrawal fees entirely, use exchanges such as Kraken, Gemini, or FTX, which all charge zero withdrawal fees regardless of the coin being transferred.
Deposit fees, on the other hand, are probably the least common of all the fees discussed here, but they're also not uncommon. Some platforms, for example, charge you for depositing crypto funds into an account you hold with them, though the fee varies depending on the type of deposit.
Over the last few years, staking has become an extremely popular feature offered by a wide range of exchange platforms. In a nutshell, staking entails putting some of your funds up as collateral in the Proof of Stake or Proof of Delegated Stake process, which allows you to earn a passive income. However, staking does not always come cheap.
Staking fees are typically deducted from your earned staking rewards rather than being set as an additional charge that a user must pay. These fees on a platform can be the same across the board or vary depending on the token being staked. Some platforms, such as Binance, do not charge staking fees.
To Save Money, Learn About Crypto Fees.
Before you conduct any type of transaction on your chosen platform, it's always a good idea to be aware of the various fees you'll be charged. Doing your research in this manner can save you money and open the door to a variety of other platforms that charge much less, or nothing at all!
