Some use exchanges just to store cryptocurrencies while others actively trade. How do the exchanges make money? Do they cheat traders? How safe is DeFi? What are the prospects for cryptoprojects?
We will discuss it with Vladimir Okhotnikov.
Vladimir Okhotnikov is an expert in crypto and blockchain, investor and developer of landmark crypto projects.
Vladimir Okhotnikov: complex concepts in simple words
Cryptocurrency has enormous potential. It has already begun to change the world of finance. And as a result, with the growth of interest, the level of earnings on crypto exchanges also increased. But is it true that exchanges deceive users? Isn't it enough for them to have what they already have?
Crypto exchanges make money in different ways and it depends on their strategy. Most earn the bulk of their income from commissions charged to users for trading. For example, if you want to buy
100 worth of Bitcoin on an exchange, you will pay
101 (
100 per BTC plus 1% commission). In this case the exchange receives
1 commission for this transaction.
Likewise, if another user wants to sell
100 worth of Bitcoin, they will receive
99 after deducting the 1% exchange fee. Thus, the exchange makes money on both sides of the transaction.
“Different exchanges may charge different commission rates, and these may vary depending on trading volume. Can this be called cheating? I think it’s unlikely, since this is ordinary commerce,” Vladimir Okhotnikov disproved the opinion that exchanges manipulate rates.
Listings
But with listings everything is not so simple. This is a fairly large expense for companies that want to release a token on the open market and an excellent earning opportunity for the exchange. Let’s just say that those whom we are used to seeing in the top 5 set a price tag high enough for the coin to end up in the traders’ book.
This practice brings good income to exchanges and helps provide liquidity for new cryptocurrencies. At the same time, exchanges avoid cases where there is the slightest suspicion of fraud, because such projects can cause serious damage to reputation.
Trading signals are evil
Vladimir Okhotnikov:
● “It seems to me that most of the people who actively attract users to exchanges are associated with trading signals. They really trade and use the experience to make successful trades.
Everyone who somehow ended up in crypto has gone through the trading stage. I have no doubt that this was not the easiest experience for you. And I am sure that as soon as someone raises good money, this person begins to think that now he or she can be considered an expert.
However, many of you are faced with reality because not all people understand that trading is an art and you need to have certain skills and knowledge. Many people believe that following signals can make money. But that's not true.
I believe that before following the advice traders should be educated on proper trading and know how to set stop losses and take profits.”
DEX vs CEX
Vladimir Okhotnikov:
● “I've been saying for a long time that we're heading into the era of decentralized exchanges (DEXs). However, what is their response to this and how are they preparing for this prospect? Can't such giants as Binance and Coinbase lose influence due to the transition?”