How Do Crypto Companies Make Money?

Many platforms such as Coinbase and Webul make money off of people trading on their websites. There are many ways they do this, but we're here to explain it simply. Let's start with trading fees.

Trading Fees

Every time someone buys or sells crypto, the exchange takes a small cut of that transaction. For example, if you buy $100 worth of bitcoin, an exchange like Coinbase may take 2% of 2 dollars. This may seem like not much money at all. However, millions of dollars are traded in crypto every single day. So, if an exchange is taking 2% on every trade, they end up making possibly millions themselves.

Spread

Some sneaky companies don't even tell you the amount that they are taking from you. They mark it up slightly. For example, If Bitcoin is worth $50,000, the exchnage may sell it to you for $50,500 and keep the $500 difference. Exchanges do this to encourage the buyer to buy more without realising how much they are losing. It's like when you sell a candy bar to a friend for $2 even though you got it for $1.50.

Withdrawal and Network Fees

Moving cyrpto to and from your wallet costs a bit of money too. When you move that money, it goes through something called the blockchain which tracks the transaction. Part of the money goes to the blockchain becuase they made the transaction for you. It's like paying the delivery driver a fee for bringing you pizza.

Staking and Lending

Just like banks, crypto exchanges sometimes take your money and lend it, or stake it (lock it up to earn rewards. In this way, the exchange can still give you majority profit, while keeping a slight amount.

Premium Services

Another tool that a lot of companies use is charging extra for a "pro" version of their platform. These upgraded accounts can have benefits from faster trading, or even lower fees.

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How would YOU make money as an exchange owner?