Considering the importance of market makers to crypto exchanges, paying 0.2% as fees is frustrating and at times, acts as a barrier.
So why are market makers so important?
Traders transact with other traders on the same exchange and create liquidity. In simple terms, market makers buy and sell assets with other on a common platform(exchange), creating liquidity in the market which facilitates the entry of customers in large numbers and promotes healthy withdrawals.
If there were no market makers, there’d be no transactions on that exchange leading to its downfall.
This is one of the main reasons why certain coins and tokens are withdrawn from an exchange — not enough market makers, hence no liquidity.
Aware of the importance market makers have, one would be surprised to learn about the fees they have to pay. Kraken charges their market makers with 0.16%.
It only goes higher — Huobi users are charged 0.2% while Bittrex has a fixed fee for both; makers and traders of 0.25%. This seems illogical owing to the knowledge we have about a market makers role in the crypto ecosystem.
Solutions to this problem
It is clear to all that market makers are crucial to the functioning of a crypto exchange and if the exchanges want their liquidity and volume intact, their fee structure needs rework. Setting an example for others on this front is ETERBASE.
The exchange has a favourable fee structure where all makers are charged a fee of 0.01% and the cherry on the icing on the cake? It drops even lower for users who possess XBASE tokens — which even drops to negative numbers depending on the number of tokens in possession. Simple translation? Market makers can get paid for providing liquidity.
It’s not hard to see that ETERBASE is not only aware but also values the role of a market maker unlike Kraken, Huobi and Bittrex.
With every passing day, the crypto market is maturing and evolving which means that exchanges need to do so as well.
A major step towards adapting this practice would be to accept the importance of a market maker and build a new framework which is favourable to the makers.