From the moment they appeared on the markets more than a decade ago, digital currencies have been promised as a new and improved way of doing business. Finance would indeed never be the same after their arrival but knew at the time what all of it means. In comparisons to traditional currencies like the dollar, the pound, or the euro, cryptos were also assets to invest in and not just a currency to use for trading.
One of the things that made them very popular from the very moment they stepped to the scene was the promise of no fees being present in trading. The users were skeptical and they were right to do so.
How can there be no fees? How would the platforms and those in charge take a cut of transactions? Wouldn’t that hurt the intermediaries, the third parties, and the institutions involved in the game? Fast forward to 2022 and everyone now knows how and why this is possible.
Different Model of Finance
The world of digital currencies does not rely on taxes and fees to survive because the whole model of the industry is inherently different than what humanity knows and what we are accustomed to. This is why nobody believed something like a digital currency could even exist.
Of course, some fees have to exist in order for the platforms to be operational. But they are nowhere near as high as what people are used to. Now, when cryptos have established themselves as legitimate commodities to invest in and real currencies to trade with, we talk about the exchange fees that do exist and that have always existed.
Read on to find out about things every trader needs to know about cryptocurrency exchange fees and make sure to check out https://nft-era.io/ for more information.
1. It Is the Exchanges
When the topic of conversation is trading cryptocurrencies, we cannot have a discussion without also talking about crypto exchanges. Cryptocurrency exchanges are online platforms where the users go to do all of their business with their assets. From buying and selling them to trading them with new business partners, exchanges have it all.
They are equipped with the latest news, advice and tips, and each free account comes with an electronic wallet. This makes them one-stop destinations for all things related to cryptos. Since they are completely free to use, they must make some kind of money for their incredible service.
There are hundreds of them, but there are hundreds of millions of traders. Offering so much completely for free would not be possible, hence the very small fees that exist. Exchanges are really the only places where you should worry about fees.
2. Types of Fees
There are different types of fees in the crypto market. These are mainly trading fees, deposit and withdrawal fees, and interest/borrowing/liquidation fees. Trading fees are the primary source of revenue for crypto exchanges despite being extremely low, a lot less than 1% on average. These are charged whenever there is an exchange of fiat (traditional) currencies, as well as an exchange between two different cryptos.
This makes the trading fees something of a regular occurrence on exchanges and the amount that you will most likely be paying whenever you do business. Another type of fee is the deposit or withdrawal fee, which as the name suggests takes place when the users either put money in their account or take it out.
These are most often flat and not in percentiles, but they may vary between different countries. Some crypto exchanges also offer margin trading, which is the ability to borrow funds. If so, there is usually an additional fee on the borrowed amount as well as an interest rate.
3. Location Matters
As mentioned, and as you probably know already, cryptos are largely unregulated still. There are few laws that dictate how the business can be conducted. However, differences between regions and countries do exist and they tend to be quite big in some cases.
The exchanges themselves are unregulated in many countries and some of the biggest trading markets are entirely unregulated. While in the USA each exchange has to register with the Financial Crimes Enforcement, this is not the case in many other territories.
This is a clear example of a country where services are not charged the same. As there is no such condition in some other countries, the fees are also different. All in all, these numbers are quite low and they hardly matter in the long run. We are all used to experiencing hefty fees and taxes so anything that is less than what we are paying already is great.
4. They Will Remain Low
If there is one thing that the common folk hates more than paying fees and taxes, it would be the fact that they are no strangers to being raised over time. Just when we get used to paying them and living with the financial damage, the institution that imposes it raises the amount that you have to pay.
Both the taxes and fees are prone it and it is not really a good thing that people have simply grown accustomed to it. This is not the case with cryptocurrencies not will it ever be. Since there is no need for taxes to be raised as nobody is making a profit from the transactions, they will remain low basically forever.
The core concept of fees is for the bodies that offer the services to make a passive profit. A few percentages may seem irrelevant when the amount is low, but across millions of transactions and millions of clients it builds up into a fortune.
The institutions earn simply for allowing the service to existing, way more than they need to. Since exchanges and other crypto-related platforms do not earn in the same way, their need for higher taxes is nonexistent. Therefore, it is safe to say that the exchange fees in the crypto industry will always be minuscule.