Crypto Exchange Model for Businesses
By Antier Solutions 🛡️ on The Capital
With the increased adoption of cryptocurrencies, crypto exchange owners are raking in huge profits. One of the leading crypto exchanges, Binance, crossed $1 billion in cumulative profit last year in 2019. It is documented that the revenue of crypto exchanges is outperforming the revenue generated by Europe’s leading financial institutions — The Deutsche Bank in Germany.
So you must be curious to know how crypto exchanges are making million-dollar profits even when cryptocurrency and blockchain are in their nascent stage. This article will answer your question of how crypto exchange owners are making a 7-figure profit.
Revenue streams of crypto exchange owners
There are various revenue streams through which a crypto exchange — whether a custom exchange or a white label bitcoin exchange — can make huge profits. Let us comprehend each of them one by one.
- Trading Commission
For exhibiting a clear and successful transaction with any cryptocurrency exchange, crypto traders have to pay a certain transaction fee or commission to validate the transaction. Different exchange platforms charge a different commission for each transaction, and it generally varies from 1% to 3%.
For instance, Coinbase charges approximately 2.99% as its trading fee whereas Binance charges 0.1% as its fee. The profits gained by crypto exchanges were high despite the bearish crypto market in the previous year. Statista presented 30 days trading volume of exchanges and it was seen that BKEX led with 46.37 billion US dollar market, making it the largest crypto exchange.
- Listing of IEO and new cryptocurrency
Earlier, the trend was to launch every crypto project on its platform, known as Initial Coin Offering (ICO). But now, there has been a shift in the trend and crypto projects are being launched on popular, already existing exchange platforms, depending on the number of traders and brand awareness that the project that can acquire from that particular exchange. This enables crypto exchange owners to launch a stable product in lesser time duration. Additionally, it ensures traders the legitimacy of the upcoming project. The platform owner also gets to earn revenue in terms of listing charges. The charges of the platform vary on the popularity of the exchange — be it a custom exchange or a white label Bitcoin exchange.
- An average exchange charges around 5–10 BTC per listing
- Medium exchanges charge 10–50 BTC per listing
- Large and top exchanges charge $1 million to $2 million per listing
- Launching a crypto token on a white label bitcoin exchange platform
We would explore this point with the help of an example. Binance launched its crypto token in the name of Binance Coin (BNB) and gave additional lucrative options with their token for better user acquisition. They offered traders an additional commission of 50% on the trading fees while trading with the BNB coin. It led BNB coin to reach an all-time high of $39.57 in a short time duration.
- Deposit and withdrawal fees
The conversion of fiat currencies (USD, EUR, GBP, etc.) among each other takes a huge amount of conversion rate. For instance, Simplex charges a minimum of $10 as a conversion rate regardless of the conversion amount. On the other hand, if you are going for crypto-to-fiat or fiat-to-crypto the additional fees are very limited. Some exchange platforms even charge as less as 0.01% as their conversion rate on deposits and withdrawals.
This mechanism prompts the investors and traders to start trading in crypto exchanges and simultaneously the profit margin of the exchange owners would also elongate.
- Consultancy fees
There is an increased number of individuals who wish to transact in cryptocurrencies but do not have the required know-how to invest in these digital currencies. A large number of companies have come up and started providing consultancy services to crypto investors and traders and are getting paid for it.
- Cryptocurrency Stacking Schemes
Nowadays, stacking is one of the major strategies used in bitcoin exchange software development. Stacking involves locking traders’ funds in the exchange and providing them with an interest in turn; the interest usually varies between 1% and 10%. This provides an opportunity for exchange owners to diversify their investment and create more revenue streams.
A business model defines the success of any custom exchange or white label Bitcoin exchange. Investing in a cryptocurrency exchange may prove too great opportunity for revenue generation.
If you are considering bitcoin exchange software development, Antier can help. We offer customized exchange development solutions to build secure and scalable exchange platforms fortified with industry-leading features for world-class performance. Additionally, we offer white label exchange software, integrated with a robust matching engine and capable of processing 100,000 transactions per second, which can be launched in just 3 weeks.
View a free demo of our white label exchange or connect with our subject matter experts to share your requirements for a custom exchange built from ground zero.