The maker and taker fee are trade expenses that must be paid by the users of a platform on which assets are sold. In this case, it concerns the purchase and sale of cryptocurrencies on a crypto exchange.
For crypto exchanges such as bitvavo, the trade costs fall as a user’s trading volumes increase. In the case of bitvavo, the taker and maker fee are based on a user’s trade volume of the previous 30 days.
What is a maker fee?
The maker fee comprises the transaction costs payable by the creator of a limit order. When placing a limit order, you are offering a certain cryptocurrency for a price below the current market price, or a sell order above this price.
In the financial world, a ‘maker’ is the party adding an offer to the market. This term is therefore not just used for cryptocurrencies, but for example also in the world of fiat currencies.
A maker thus adds liquidity to the market. A maker does so by adding a certain asset to the market. For example, selling cryptocurrencies on a crypto exchange. By doing so, the selling party is adding supply to the market.
Adding supply increases liquidity. After all, there are now more assets being sold, allowing buyers to purchase assets faster and at a cheaper rate.
The maker fee is lower than the taker fee. This is because a maker contributes to market liquidity. If a maker is charged high costs, less liquidity is created and consequently less trading occurs. This is why makers are kind of ‘rewarded’ with lower costs.
An order placed by a maker is not immediately filled. An order may exist in the order book for a few minutes, hours or even days before someone accepts it. It’s only when the order is accepted that the assets for sale are in fact sold for the predetermined price.
Why do makers have to pay fees at all?
Although a maker contributes to the platform’s and market’s functioning, they still have to pay fees to the platform they use to sell their assets. This is because transactions must be processed, and that costs money.
A central exchange like bitvavo for example processes a transaction. Processing a transaction involves costs. For example the electricity costs of the server, but also the costs of the employees maintaining the platform.
What is a taker fee?
The taker fee comprises the transaction costs users pay as soon as they remove a limit order. This limit order is placed by a maker, and the user removing it is therefore called a ‘taker’.
While the makers create supply, takers create demand for a certain asset. Without takers, there would be no demand, and (in line with the classic economic model) asset prices would fall.
Because the taker uses the platform, fees must be paid. In many cases, the taker fees will exceed the maker fees. The platform wants to be able to offer as much liquidity as possible, and this fee structure helps attract makers.
The taker can immediately fill an order. This means that the taker will immediately receive his assets when he completes an order. The taker does not need to wait for a confirmation or for another party taking the order.
What is the difference between a maker and taker fee?
The difference is that the maker fee is paid when a limit order is placed and when the order enters the order book. The taker fee is paid when one takes advantage of someone’s offer. This can be a market order, but it can also be a limit order that can be directly linked to an order in the order book. So users only pay the lower maker fee when they actually add liquidity to the order book.
There is almost always a difference between the level of the maker and the taker fee. This is because a maker adds liquidity, which allows a platform to function better. Adding liquidity is therefore rewarded with lower costs.
What other costs are paid to a crypto exchange?
The maker and taker fee are some of the costs that users of a crypto exchange may encounter. In addition to these fees, there may be other costs such as withdrawal and deposit fees.
Deposit fees
Before you can buy cryptocurrencies, you’ll need to deposit money into a crypto exchange. The amount deposited by the user is then added to the account balance. The user can use this amount to buy cryptocurrencies on the exchange.
Depositing money is not always free, and this is why deposit costs must be paid. The amount of the deposit fee depends on the payment method used. It can sometimes be cheaper to use a specific payment method when depositing money to a crypto exchange.
At bitvavo, users do not pay any fees when using iDeal and SEPA. It is therefore free to deposit money on the bitvavo platform when using these payment methods.
Withdrawal costs
It is also possible to send cryptocurrencies to another wallet. This requires using the blockchain that a cryptocurrency runs on, and this comes with a cost. Users must therefore pay withdrawal fees, also known as blockchain fees, for sending cryptocurrencies to another wallet address.
These fees are used to pay the miners or validators of a blockchain network. The amount of fees involved depends on the cryptocurrency. For one cryptocurrency, the costs are higher than another cryptocurrency. Added to this is the fact that a blockchain can be busier at one moment than the next.
The moment more transactions are carried out, the costs that have to be paid to the miners and validators increase. bitvavo has no influence on these costs, because they are determined by the blockchain’s network.
Summary
The amount of the marker and taker fee depends on liquidity and bitvavo has no influence on this. This is the case when, for example, a limit order is placed. The person who places the order is called the ‘maker’, and pays a lower maker fee. This is a cost for using the platform.
The person who fills the maker order is called a ‘taker’. A taker fee must be paid by this user because the platform is being used. The taker fee is generally higher than the maker fee. This is because the creator provides liquidity and a platform such as a crypto exchange could not exist without liquidity. In this way, a platform wants to attract creators.
In addition to the maker and taker fee, there are other costs that users need to think about when using a crypto exchange. These are the deposit and withdrawal fees. The deposit fee is paid for depositing fiat money on an exchange. At bitvavo, users do not pay any fees for depositing money using the payment methods iDeal and SEPA.
For sending cryptocurrencies to another wallet, withdrawal fees are paid. These are the fees that need to be paid for using the blockchain that the cryptocurrencies run on. Bitvavo has no influence on these fees, as they are determined by the blockchain’s network.