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Binance CEO Changpeng Zhao disclosed that his exchange is overwhelmingly dependent on transaction fees for revenue generation.
Binance chief executive officer Changpeng “CZ” Zhao recently revealed that the crypto exchange generates 90% of its revenue from transaction fees. In a TechCrunch interview from 2 weeks ago, Zhao also added that his company had removed all ads from the data site CoinMarketCap. Binance acquired CoinMarketCap in 2020.
According to him, Binance chose to remove ads to allow for a cleaner experience. However, CZ noted that the exchange could decide to reinstate ads at any time. He said:
“We can turn that back on, that’ll give us $40 million a year. But we don’t need to today.”
Binance had an estimated revenue of around $20 billion last year. In January, DA Davidson & Co analyst Chris Brendler put Binance’s scale in perspective by drawing a favorable comparison with popular US exchange Coinbase. Despite Coinbase’s high visibility in North America, Brendler stated:
“Coinbase might appear to be the 800-pound gorilla from a US perspective, but Binance is significantly bigger.”
Breakdown of Binance Transaction Fees
As of November 14th, Binance charged transaction fees for a wide range of services on its platform. The leading crypto exchange lists more than 200 types of digital currencies that its customers can trade, withdraw, and deposit. These include Bitcoin (BTC), Ether (ETH), Dogecoin (DOGE), Litecoin (LTC), Bitcoin Cash (BCH), and stablecoins such as Tether (USDT). In addition, Binance also allows customers to trade its native Binance Coin (BNB).
Binance fees include purchase fees, which vary depending on the payment method. For instance, the exchange charges up to 3.75% for crypto purchases with a debit or credit card. However, Binance does not charge for wire transfers, although this payment option is unavailable in some locations.
Binance does not charge deposit fees, although customers would need to convert their fiat to digital assets before onboarding their investments. Other fees charged by Binance include trading fees ranging from a 0.10% to a 0.50% spread, depending on the trade type. The exchange also notes that customers could lower trading fees by 25% by retaining some Binance Coin in their account at all times.
Lastly, Binance charges a fee on all withdrawals. According to the wildly popular exchange, the amount incurred depends on the type of crypto involved. However, because withdrawal fees change with the market’s status, most customers cannot ascertain how much they owe in fees until the point of withdrawal.
Maker or Taker
Binance also maintains a fee schedule that shows charges based on whether the customer is a “maker” or a “taker”. According to the exchange, maker trades occur with placing an order that goes on the order book partially or fully. These include a limit order placed through the trading screen. Meanwhile, taker trades happen on an order that trades immediately before going on the order book. This transaction occurs irrespective of whether the customer partially or fully fulfills an order. Binance taker trades usually remove volume from the order book, hence the “taker” term.