When it comes to cryptocurrency transactions, manufacturer and taker fees are two terms you often hear. Every transaction you perform will incur manufacturer and receiver fees. So the question is, what do these two terms actually mean?
Well, if you have the same question and want to understand the science behind it, you have come to the right place.
In this article, I will briefly explain the manufacturer and receiver costs to help you better understand.In addition, we will Comment on Bybit Exchange When you do cryptocurrency transactions with them, understand its costs. So let’s get to the topic right away:
What are the market makers and takers in the transaction?
In any type of market, there are two types of traders. These traders are called market makers and market takers.
The job of a market maker is to buy at the current best price or to sell at the current best price. As a result, they have established a market that is reflected in the current final price. In addition, they create liquidity in the market.
In addition, market makers are always looking for buying or selling opportunities. But in the event of extreme volatility, they may not conduct any transactions.
On the other hand, some market takers are less concerned about executing their bids at the best possible price. Instead, they seek the immediacy and liquidity provided by market makers.
But to help you understand better. Here is a detailed explanation:
Market makers seek premiums from market takers. Because they provide continuous liquidity in the market. This premium is called the margin and is usually quantified as the difference between bid and bid.
Market makers generally don’t care whether they are long or long Cryptocurrency shortage When they change positions. Their simple goal is to always position themselves in the market. Because they are trading with the edge. Therefore, they can obtain potential profits with relatively low risk.
In addition, every time they are not in the market, it will bring them opportunity costs. Therefore, market makers often operate in different markets at the same time. Therefore, their profits are not limited to one type of market.
Market takers need immediacy and liquidity to execute their transactions. They want the market to have constant liquidity, enter the transaction at a reasonable price and end the transaction at the price they want.
In addition, they accept the fact that they must give up the advantages or premiums of the services provided by the market maker.
In addition, unlike market makers, recipients change their position in the market less frequently. In addition, they don’t care much about transaction costs.
However, there do exist market traders who trade frequently. But in terms of transaction volume and transaction volume, the market always tends to be more active. Because this is why they make profits.
How much does Maker cost in Crypto?
The manufacturer fee is basically a certain amount of money applied to orders executed on the trading platform.In addition, when you place an order in the market, you Increase liquidity for exchanges.
Liquidity will only be created when you place an order on the exchange, and other traders will execute the order. Because it requires two traders to execute the transaction.
By placing an order for another person to execute, you, as a trader, increase liquidity in the order book. Therefore, you play the role of the manufacturer, and when the order is executed by other traders, you will be charged the manufacturer’s fee.
The working principle of a pending order is to place a pending order with a price higher than the highest buy order on the platform. Or a buy order at a price lower than the lowest sell order on the exchange.
By issuing orders to sell at a higher price in the market, pending orders will increase the liquidity in the order book and will charge manufacturer fees.
For example, if the transaction price of ETH/USDT is 4,000 USD, the trader must place a limit order to sell ETH at a price higher than 4,000 USD.
But if the order is not filled at the current price or matches any order, it will increase liquidity in the order book.
How much does the Taker cost in Crypto?
The acceptance fee is the cost applied to the order when it is executed on the trading platform. This will charge fees for placing orders in the market, which will cause the liquidity of the exchange to disappear.
This involves placing orders in the market for immediate execution or when they match other traders’ orders. In this way, recipients are taking away liquidity from the market.
The recipient completes the available orders in the order book through buying and selling. Therefore, when the order is executed, you must pay the recipient’s fee.
The working principle of a market order is the next market order, which will be immediately matched in the order book of the trade fair. But in case, if there is not enough liquidity in the order book to fill the order, it will be rejected or partially filled.
However, when you place a limit order, the order will be immediately matched in the order book. The recipient will have to pay a slightly higher fee, called the counterfeiter fee. The recipient fee is basically paid for fast order execution and convenience.
Learn about Maker-Taker fees through ByBit Exchange
So far, we have understood the science behind the costs of manufacturers and recipients. But the question is, how does it apply to real-life transactions?
Well, for this example, we will use the ByBit exchange.It is one of the famous exchanges Provide leveraged trading of crypto assets And there are affordable manufacturer and receiver costs.
In any case, this is how the manufacturer and receiver costs are generated:
Before we continue, one thing that should be clear is that when your order is not executed immediately, a manufacturer fee will be charged. If it is, the recipient is charged.
In addition, on exchanges where the taker’s fees are higher, you should consider paying the manufacturer’s fees if possible. To pay the manufacturer’s fees, you need to set a limit order.
Speaking of By bit, the exchange distinguishes between maker and taker fees based on the speed of order execution.
It charges an acceptance fee for a market order to buy or sell at the best price in the market. However, when you place a limit order, you help create a market. As a result, it charges manufacturer fees.
By bit and most other exchanges use the following formula to calculate manufacturer and taker fees:
Transaction fee = transaction volume x transaction fee rate
For example, if the price of Bitcoin is 40,000 USD, then a trader can buy or sell 0.5 BTC with 20,000 USDT.
Traders use USDT to buy 0.5 BTC using market orders. Trader B bought 20,000 USDT USDT using a BTC limit order.
In this case, the taker fee for Trader A will be 0.5 × 0.1% = 0.0005 BTC. And Trader B’s manufacturer fee will be 0 USDT.
After the order is completed, Trader A will buy 0.5 BTC through the market order. Therefore, Trader A must pay a taker fee of 0.0005 BTC. As a result, Trader A will receive 0.4995 BTC.
On the other hand, Trader B bought 20,000 USDT with a limit order. In this case, no transaction fees are required and the trader will receive 20,000 USDT.
What are the advantages and disadvantages of Maker orders?
In most exchanges, maker fees are lower than taker fees. This is to encourage traders to increase market liquidity. Due to the higher liquidity in the order book, a lower spread between the buying price and the selling price can be provided. This allows traders to execute positions with minimal slippage.
However, the only disadvantage of the manufacturer’s order is that it takes time for the buyer to fill out the order. Or, in some cases, your order may be stuck on the order book and will never be completed for a particular trading pair. Or, you may not be able to find a buyer or seller at the price of your manufacturer’s order.
What are the advantages and disadvantages of taker fees?
The advantage of using taker orders is that the order will be executed immediately on the exchange at the current market price.
Therefore, you, as a trader, can execute trades quickly without waiting for other traders to complete your order.
The advantage of using take orders is The order will be filled immediately The current market price in the exchange. This means that traders can execute trades quickly without waiting for other traders to fill out orders.
However, the disadvantage of using take orders is that some exchanges will charge you higher fees. Because they are removing liquidity from the exchange to match your order immediately.
In addition, in most cases, the order will be executed at a lower selling price, or you will have to pay a higher buying price compared to a market order.
This is all about the manufacturer and receiver fees in encrypted transactions. I hope this helps you understand when and why the manufacturer or recipient is charged. If you have any questions, please leave a comment below.