How do crypto exchanges make money in 2023?
How do crypto exchanges make money in 2023?

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Over the past decade, cryptocurrency exchanges have been sprouting up around the world, contributing to billions of dollars in trading volumes. While it’s still relatively early days for the blockchain and cryptocurrency industries, entrepreneurs worldwide have been quick to jump on the financial opportunities presented by cryptocurrency exchanges—and for good reason, considering how profitable they can be.

Largest Exchanges of Crypto?

In financial terms and trade value, those exchanges rule the roost. The biggest is Binance, which is twice the second-largest in 24-hour trading volume: HBTC. The top five in the 24-hour volume of trading (USD billion) are:

  • Binance
  • Hydax
  • HBTC
  • Xtheta
  • Dsdaq

As you can see, effective exchanges of cryptocurrency make some serious money. But how are such figures produced? There are various ways to generate revenue by an exchange.

There are several different methods that an exchange will create revenue.

Deposit fees

Many exchanges charge a fee for transferring currencies. This is called a deposit fee, which is different from the transaction fee you pay when you make a sale or purchase through the exchange.

When you deposit money into a cryptocurrency exchange, you are buying the currency from them. This is a process called purchasing. Since it is the exchange that you are giving the money to, you have to pay them a fee for this service. This means that if you are trading on margin, you get charged an additional fee.

If you are using a trust-based system, this means that you will need to deposit a certain amount into a wallet to prove that you have sufficient funds (2FA).

Withdrawal fees

Crypto Exchange withdrawal fees are a type of withdrawal fee charged by a crypto exchange when you withdraw cryptocurrency to your wallet. These withdrawal fees vary from exchange to exchange, but most of them offer you a choice; You can either pay a flat fee or a percentage of the amount you want to transfer.

Trading commissions

Commissions on trades are perhaps the most common monetization strategy for exchanges, cryptocurrency, and stock exchanges alike. This commission acts essentially as a service fee for brokering a trade between buyer and seller.

In the digital asset exchange market of today, commissions of less than 0.01% are standard. Naturally, this low commission level necessitates higher trading volumes.

Taking an example of a $1,000,000 volume, the exchange would earn a commission of $1,000. Regardless, top cryptocurrency exchanges have daily trading volumes in the millions of US dollars—which generates massive commissions on successful trades.

With some of the most famous exchanges facilitating volumes of billions of dollars, it becomes apparent how lucrative these ventures will become. Digital asset exchanges should see increasing volume and commission revenue as the cryptocurrency market matures and expands.

Listing fees

The early phases of younger cryptocurrency exchanges are inevitably characterized by minimal volume. Due to this, these exchanges cannot rely exclusively on commission revenue during their growth phase. The digital asset exchanges may also offer a service that allows users to list tokens and coins to drive initial revenues.

An exchange may collect a percentage of funds raised from an Initial Exchange Offering (IEO), an Initial Coin Offering (ICO), or a Security Token Offering (STO). Depending on the project, the amount of funding collected may exceed hundreds of thousands of dollars.

However, despite extremely low volumes, some exchanges have nevertheless raked in billions in listing fees. This, in turn, has increased competition for token and coin listings, and as the market matures, the competition becomes far more intense and less assured.

Several exchanges have begun doing so-called “wash trading,” a practice in which they artificially enhance the volume they report on websites that display specific cryptocurrencies’ market capitalization.

This is a way of doing business that is unethical and exploits those just starting out trading more often than not.

Market making

Providing liquidity for a given financial instrument is another primary source of revenue for cryptocurrency exchanges. Market making refers to the act of buying and selling a digital asset on your exchange, but at slightly lower prices than on the other exchanges.

As soon as you close the trade on your exchange, you place a different deal which cashes out the first trade difference. Especially in markets with large spreads, this technique works well when it is performed automatically.

IEO, STO, and ICO fund collection

Also, adding an IEO module to the exchange platform can help drive revenue. This idea creates a similar system to crowdfunding works by allowing contributors to get tokens for ETH or BTC before they go to an exchange.

As a fundraiser, how does exchange get paid? They charge a percentage of total proceeds as a fee when they collect funds on behalf of the company. It could mean a significant payout to the hosting exchange, depending on the total amount raised.

Choosing the right exchange to trade with

When you first get into cryptocurrency, one of the first things you’ll need to do is choose an exchange to trade on. When choosing a cryptocurrency exchange, there are a lot of things to consider.

A cryptocurrency exchange can be an excellent place to buy and sell a cryptocurrency, but an inferior exchange can cost you money. You need to check the following things to determine which exchange is the best for your needs:


An exchange’s security is by far the most critical factor. If it’s not secure, criminals (or even the exchange themselves) could steal your funds. This would leave any other advantages meaningless.


Do they use the secure HTTPS protocol? How about 2-factor authentication when you log in? These are essential questions to ask yourself when researching. Those two points are the very basics that you should expect an exchange to utilize, but several other issues related to the technology you should investigate further.


In general, the more liquid a particular exchange is, the faster transactions can be completed without experiencing price volatility.


Popular cryptocurrency exchanges can take severe amounts of income that they serve from the various methods discussed in this article.

There are various means by which an exchange can cheat you out of your money when looking to raise funds. Therefore when using one, common sense and vigilance are recommended.

What Is A Cryptocurrency Wallet?

Just like any other digital wallet, a cryptocurrency wallet helps users store, send and receive cryptocurrency.

It is a piece of software that safely stores cryptocurrencies and keeps track of their transaction (buying, selling, and lending) records. Users can easily download and install a cryptocurrency wallet on their smartphone or any other compatible device.

Here’s how the crypto wallets function:

You need two things to transact in crypto – the first is your wallet address, which is also known as your public key, and the second is your private key.

A public key is something like your bank account number. You can share your bank account number with other people or institutions to send or receive money. Similarly, you can share your public key, which is your wallet’s address, to receive the crypto.

The private key of your crypto wallet can be compared to your bank account password or the PIN to your debit card, which is confidential. You wouldn’t want to share your PIN with just anyone because that would give them direct access to your bank account.

A private key is a password that provides access to your cryptocurrency.

Whenever you want to acquire cryptocurrency, whether through purchasing or receiving it as a gift, you direct your crypto sender to a unique cryptographic address issued by your wallet.

So, the cryptocurrency wallet doesn’t directly hold your crypto coins within your wallet – They live on the blockchain. Since the cryptocurrency is not present in any physical form, the crypto wallet keeps the information related to your public and private keys, which is your ownership stake of the crypto.

With the help of both of these keys, you can send or receive cryptocurrency while keeping your private key completely encrypted.

How do you use a crypto wallet?

Crypto wallets range from simple-to-use apps to more complex security solutions. The main types of wallets you can choose from include:

Paper wallets: Keys are written on a physical medium like paper and stored in a safe place. This of course makes using your crypto harder, because as digital money it can only be used on the internet.

Hardware wallets: Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto. The idea is to try to balance security and convenience.

Online wallets: Keys are stored in an app or other software – look for one that is protected by two-step encryption. This makes sending, receiving, and using your crypto as easy as using any online bank account, payment system, or brokerage.

Each type has its tradeoffs. Paper and hardware wallets are harder for malicious users to access because they are stored offline, but they are limited in function and risk being lost or destroyed. Online wallets offered by a major exchange like Coinbase are the simplest way to get started in crypto and offer a balance of security and easy access. (Because your private info is online, your protection against hackers is only as good as your wallet provider’s security – so make sure you look for features like two-factor verification.)

Using an app like Coinbase Wallet or Exodus gives you easy access to your crypto holdings. You can:

  • Manage all your digital assets in one secure place
  • Control your own private keys
  • Send and receive cryptocurrency to and from anywhere in the world
  • Interact with usernames rather than long, hexadecimal “public key” addresses
  • Browse dapps (decentralized finance apps)
  • Shop at stores that accept cryptocurrency

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