Trading fees are costs that users pay when they engage in transactions on a blockchain network or trade cryptocurrencies on an exchange. When trading on a cryptocurrency exchange, users typically encounter two types of fees: maker fees and taker fees.
Maker fees are charged to users who add liquidity to the market by placing limit orders that are not immediately matched. These orders sit on the order book and ‘make’ the market. Taker fees are charged to users who remove liquidity by executing trades that match existing orders on the order book. These users ‘take’ the existing market liquidity.
In blockchain networks like Ethereum, users pay ‘gas fees’ to execute transactions or smart contracts. Gas fees compensate validators for the computational work required to process and confirm transactions, and the cost of gas can fluctuate based on network congestion and the complexity of the transaction.
In the Bitcoin network, transaction fees are paid to miners who include the transaction in a block. These fees vary based on the size of the transaction in bytes and the current demand for block space.
Exchanges often charge fees for withdrawing cryptocurrencies to external wallets; these fees can vary depending on the currency and network congestion. Some exchanges also charge fees when users deposit funds into their accounts, though many do not charge for deposits. Note that, when trading on margin (borrowing funds to trade), the interest that exchanges charge on the borrowed amount is another form of trading fee.
Additional fees can be related to network and margin fees, as well as inactivity fees, where some exchanges charge if a user’s account remains dormant for a specific period. Network fees are paid directly to the blockchain network when transferring assets between wallets or exchanges. They are separate from exchange fees and used to compensate miners or validators.
