- Summary:
- Cryptocurrency exchanges charge fees to process transactions, however, they are under pressure to reduce or even eliminate the fees.
Even though centralized exchanges (CEXs) make it extremely easy for anyone to enter the crypto trading scene, these exchanges’ increasingly complex and varied fee structure has started attracting mainstream attention.
With the unprecedented growth of cryptocurrencies, dozens of centralized exchanges entered the marketplace, each offering different fee structures for crypto-to-fiat and crypto-to-crypto conversions. Add to it trading commissions and transfer fees, and the overall fee structure becomes even more complicated.
By design, each crypto exchange is different, and every transaction on these exchanges is processed (and registered) differently on the blockchain network. Since each blockchain network has its gas costs, the average transaction fee tends to vary a lot. For instance, if a centralized exchange uses Ethereum to process transactions, it will have to bear Ethereum’s gas fee, which usually runs on the higher side. Furthermore, if the exchange also facilitates multi-chain transactions, it will also need to pay a fee. As a result, the exchange charges the trader to cover these costs.
However, the problem is much more deep-rooted than it seems. One significant issue is that there isn’t an exact amount for the network fee. It depends on the total number of transactions processed at a certain point in time, the network bandwidth, and several other factors. Accordingly, there are high chances that the fee may fluctuate, making it difficult for exchanges to set a precise figure.
The Quest For Lowering Exchange Fees
Firstly, centralized exchanges are service providers, and their entire business model relies on the fees paid by users. So, in all honesty, assuming that exchanges will start offering a zero-fee trading structure for an extended period isn’t much of a possibility.
While there is no clear timeline for a promising change in the fee structure, several prominent exchanges like Binance, Coinbase, CoinZoom, and others are continuously testing tiered subscription models, allowing customers to choose from different available fee structures.
That said, there is a high chance that the rising competition between exchanges will surely drive fees lower. As more and more crypto trading firms enter the space, the trading fees will compress to a huge extent. The logic here is quite simple; each platform will optimize its offerings to ensure lower fee structures to survive the cutthroat competition and attract new customers. This will most certainly create a ripple effect, forcing others to adapt to the change or risk losing customers.
Coinbase, one of the fastest-growing crypto platforms, tests different versions of zero-fee trading and subscription packages that feature priority customer support. Dubbed Coinbase One, this model aims to help the platform diversify its retail services. If successful, other platforms will certainly brainstorm on the prospect of introducing the same for their customers.
Likewise, AAX, another major crypto exchange, is also spearheading the efforts to lower trading fees for its customers. The platform runs a VIP program that offers exclusive discounts on spot transactions, OTC, and futures trading. Furthermore, the platform also charges the lowest withdrawal fee while offering free deposits and internal transfers.
Besides, the influx of payment providers like PayPal, Stripe, Mastercard, Visa, and many more into the crypto ecosystem will also play a critical role in helping the CEXs work together to smooth out the different fee structures, especially for retail investors.
Zero-Fee Trading Throughout November
Bybit, one of the largest global crypto exchanges, is running a promotion for its customers. All Bybit customers, both new and existing, can enjoy 0% processing fees on ETH, BTC, and USDT purchases via Simplex.
If you’re just getting started, all you need to do is register an account on Bybit and head over to the platform’s “Buy Crypto” page. Then, choose ETH, BTC, or USDT, select Simplex as your preferred payment service provider, and follow the instructions on the screen to complete your purchase to avail of this opportunity throughout November 2021.
This is an advertorial article.