Many crypto trading platforms operate on maker/taker systems. Users placing orders become either makers or takers. The market makers and takers pay commission for conducting trade on the exchange. However, the commission rates are dependent on the role the trader or client plays in the system. The rates also vary on different exchanges based on distinct loyalty programs, client status, discounts, etc.
Two types of trade orders display the distinction between makers and takers. These are limit orders and market orders.
Limit orders are orders set to buy or sell at a specific price rather than the current market price. The makers place the orders to purchase digital assets below the current price or sell above the current price. The user specifies the desired price and a specified time frame. The limit order is only executed when the desired price is achieved. The order automatically executes once the pre-specified limit order is completed. The speed of fulfilling limit orders is directly affected by the availability of prices better than the pre-specified price in the market. Therefore, traders can use limited orders to control and minimize risks.
The takers set market orders. These are orders placed to buy or sell digital assets at the most optimal price at that particular moment, that is, the current market price. The market orders are executed instantly regardless of the current market price. The primary objective of a market order is to perform a trade immediately, guaranteeing execution but not a specific price. The order is complete or filled once the transaction has taken place.
Takers set maximum and minimum prices for their bid and ask offers, respectively. They then wait for users to buy or sell the crypto at the maker’s fixed price. Market orders consider the current price to be the best price at a given time. The orders are often placed to avoid risking trade defaults experienced when setting limit orders.
A user can become a maker when he/she sets a limit order and a taker when he/she places a market order. While market makers and takers perform similar functions, the two should not be confused. Market makers are crypto trading exchange participants with significant capital and the ability to manipulate the market price of an asset. Conversely, takers are all the traders considering whether to accept or decline the offers the makers give in the order book. Generally, the difference between makers and takers lies in order execution price.
Roles and Tariffs
All crypto exchanges charge transaction fees based on the type of transaction. For instance, a maker’s commission and taker fee is charged on a user who has set a limit order and market order, respectively. The maker’s commission is often lower than the taker fee and sometimes even zero. This is influenced by the different roles the makers and takers play in developing the exchange. However, basic commissions can be constant for both makers and takers. Once a specific account balance and crypto trade turnover are realized, the balance is tipped off.
Makers place deferred orders and improve the order book size, thus improving the liquidity of cryptocurrencies on the respective exchanges. Therefore, the makers create and maintain the crypto market by attracting active users contributing to activities on the exchanges. The exchanges, in return, reward them with insignificant or zero transaction fees and sometimes pay them extra for transactions. While the paid anti-commissions may be less profitable, some users know how to leverage this opportunity to make more money.
Takers don’t provide liquidity on the platforms and add nothing to the order book since market orders are executed instantly at the current market value. Therefore, takers pay more commission as they take crypto from circulation and reduce the coin’s interest. The exchange is compelled to compensate for the loss with high tariffs.
Example: The current price of BTC is $51,098. If a user places an order to buy BTC at the current price in the order book, the market order is filled instantly. The user becomes a taker. However, if a user places to buy at a price lower than its current price, say $51,000, the order will only be executed when it reaches $51,000. The liquidity of BTC increases, and the user becomes a maker.
The more the users in a crypto exchange, the more income the exchange earns. The maker/taker system works to stimulate activities on the crypto exchanges. The model provides optimal narrow spreads by reducing the disparity between buying and selling orders. The makers’ low to zero transaction fees encourages more traders to place limit orders. On the other hand, takers create a massive and faster turnover when they withdraw from the liquidity.
Tariffs on Crypto Exchanges
Crypto exchanges have different indicators, as explained below.
Binance: Users trade on the USDT-M perpetual and COIN-M quarterly futures markets and conduct spot trading on the spot market. The commissions are calculated based on the maker/taker model and its size. Factors like BNB token usage, referral programs, and user level in the VIP program seem to influence the size of the commission. The spot market offers makers and takers 0.1% and 25% commission discounts for BNB users. Users with referral links can get discounts up to 40%, while the discounts read zero in the VIP program. Individual commissions are tailored for users holding over 50 BTC. Makers pay 0.02% commission while takers pay 0.04% for USDT-M Perpetual Futures. BNB token users pay 0.018% if they are makers and twice if they are takers. Quarterly COIN-M futures on the exchange charges 0.015% for makers. Takers pay 0.040% with zero discounts.
Bitfinex: This crypto exchange platform has a discounts system dependent on the transaction volumes over the past 30 days. Takers pay higher commissions coupled with extra discounts for Unus Sed LEO token holders.
LocalBitcoins: Buying and selling BTC on LocalBitcoin crypto exchange is free. However, the exchange has higher commissions for takers.
EXMO: The basic fees for spot trading are based on the user’s turnover, i.e., the turnover is inversely proportional to the commission. The exchange also charges tariffs on inactive accounts. In addition, EXMO has a Cashback program where makers and takers can opt for discounts. The discount is also dependent on the user’s status, i.e., a higher status translates to a higher discount. However, the maker’s discount is higher than that of the taker. EXMO also offers a Cashback bonus program for subscribers with the basic option of $1. The primary option gives makers and takers a 33% discount on the first two levels’ trading volume. A standard option costs $10 and offers takers a 33% discount, and doubles it for makers. In addition, EXMO offers Advanced status and Professional subscriptions at $100 and $500, respectively.
Huobi: The different fees in Huobi draw attention to the exchange. The crypto exchange charges both the maker and the taker a constant 0.2% when trading pairs. However, the tariff structure is different for most established trading pairs.
The maker/taker model plays a vital role in determining the specifics of crypto markets like hyperinflations in prices and precise trends. Both maker and taker activities contribute to the working of an exchange, the maker providing liquidity and the taker taking away from the liquidity.