A Simple Guide On How Cryptocurrency Exchange Makes Money
Cryptocurrency is rapidly being among people around the globe. Some cryptocurrency exchanges are open to the public but while others are only accessible by invitations. Cryptocurrencies require a special trading platform that is built especially for the complexity of cryptocurrencies. The way of cryptocurrency exchange is similar to regular stock exchanges, but the only difference is the way traders make a profit. It enables the individual to buy or sell virtual currencies such as bitcoins, ethereum etc. The main reason why people are using this is that they undergo a quick and safe transaction. A cryptocurrency exchange is also affordable and very safe. Here is a simple guide for you on how cryptocurrency exchange makes money.
Charging commissions on trade is the most popular and well-known monetization method for exchanges cryptocurrency and traditional stock exchanges. This commission is the fee for the service of facilitating trade between the seller and buyer. You can enjoy the large commission revenues because the market of cryptocurrency will rapidly increase. The commission is very low for a single transaction, but low trading cost brings in high trading volume.
During the early stages, new CryptoCurrency Exchange will inevitably struggle with minimum volume. You need another source of revenue due to high competition. Most of the exchanges prefer token and coin listing service to drive initial revenues. By organizing IEO – initial exchange offering and ICO – Initial coin offerings, STO – security token offerings exchanges may collect a percentage of funds raised from these offerings, which in itself can be to the tune of many dollars depending on the project when there are exchanges with high volume which have to produce huge amount for their founders in the form of listing fees.
Market making is another great revenue stream for cryptocurrency exchanges. It consists of buying and selling the digital asset on your own exchanges at low desirable price than other exchanges. When trade occurs on the exchange, they swap the trade on another exchange that offsets the previous trade.
The differences in the profit an exchange makes. This is the technique the works well when automated and applied to markets with large spreads, which is the difference between the bid and ask price.
Another best method for driving exchanges revenue is to quip the platform with an initial exchange offering IEO module, which allows other companies to organize token sales. Here your exchange serves as a repository for an individual to buy tokens before they go on an exchange which is sort of like kick-starter works. The author will receive tokens in exchanges for other digital assets like ETH or BTC.
You may think about how money makes money in this process? That is, when exchange collects fund on behalf of the fundraising company, it charges a few percentages of total proceeds as a fee. Based on the final raised amount, like percentage could yield a high payout for the hosting exchange.
If you involve in the process of CryptoCurrency Exchange, then it is important to know the exchange process and the money-making process. This article will be helpful for you to know the entire money-making process.