When buying and selling cryptocurrencies on a tradingplatform, you must pay transaction fees. Generally, tradingfees on crypto exchanges are divided into two categories, orders that incur a Maker Fee and those that incur a Taker Fee.
Typically, Maker and Taker Fees differ in value, with the Maker Fee usually being lower.
What Is a Maker Fee?
A Maker Fee is charged to a trader who adds liquidity to the market. This occurs when a user places a limit order that is not executed immediately and remains in the order book until another party fills it.
In other words, a Maker Fee is applied when the posted order does not get instantly matched with an existing opposite order. Usually, Maker orders do not execute immediately on exchanges.
Many crypto exchanges offer lower Maker Fees than Taker Fees to attract more users. Some platforms charge market makers a discounted rate to incentivize liquidity provision.
What Is a Taker Fee?
A Taker Fee applies to users who consume liquidity by immediately filling existing orders from the order book.
Simply put, when you place an order that is instantly matched and executed against another order in the market, you are acting as a Taker and must pay the Taker Fee.
Difference Between Maker and Taker Orders
Both market makers and market takers are essential to an active trading environment. However, Maker and Taker Fees differ across platforms.
Maker orders are typically limit orders that take time to fill, while Taker orders are market orders that execute instantly.
Who Are Market Makers and Market Takers?
In crypto trading:
- Makers place limit orders that are not filled instantly, thus contributing to market liquidity;
- Takers execute market orders that fill immediately, removing liquidity from the market.
Conclusion
Transaction fees on cryptocurrency exchanges are charged in two ways, depending on the type of order placed.
If a user submits a pending order that does not execute immediately and is added to the Order Book, a Maker Fee is applied, because such orders help add liquidity to the market.
However, suppose an order is matched and executedinstantly against existing orders. In that case, the user is considered a Taker and must pay the Taker Fee, since this type of order removes liquidity from the market.
Maker and Taker Fees vary across different exchanges, but typically, due to the removal of liquidity, Taker Fees are higher than Maker Fees.
