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The crypto industry has yet to evolve from exchanges which are nothing more than digital banks in reality. A couple are taking bold moves to slash their fees but how many others will follow and how will it affect the wider crypto industry.

True financial decentralization should consist of direct peer to peer transactions and more decentralized exchanges (DEXs), yet still centralized exchanges reap the profits like their banking counterparts.

Over the past year or two centralized trading platforms such as Coinbase and Binance made millions. Profits for Binance are easy to estimate considering the exchange burns 20% of its profits every quarter. The last time this happened was in October this year when 2 million BNB went up in smoke which equates to an estimated third quarterly profit of $185 million.

Coinbase is a little coyer when it comes to the firm’s vast earnings from some of the highest fees and spreads in the industry. Reports estimated that it cleared a billion dollars in 2017 and made around $520 million in revenue in 2018 despite a massive bear market.

In October the company updated its fee structure to effectively punish the low volume traders and favor the bigger boys with fat wallets. Bitfinex also has different rates for makers and takers depending on volume. There is another financial institution that does exactly that – a bank.

These two industry leaders are not the only ones with inordinate fees, spreads and charges for deposits, withdrawals, conversions and trading. This is exactly the antithesis of the cryptocurrency world which was envisioned a decade ago by Satoshi Nakamoto who saw a need to break free from banks.

“Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. Their massive overhead costs make micropayments impossible.”

If you were using an exchange such as Coinbase for crypto micropayments it would soon cost you more than you are trying to send.

Some exchanges are taking steps to reduce charges, fees and spreads. After all there is already an associated network fee to pay so why should users of cryptocurrencies pay more to enrich the owners of exchanges.

Poloniex is one that has offered zero fee trading until the end of the year but it remains to be seen yet if it will continue the practice into 2020.

There are a few other smaller players that have also taken up this initiative but it is really time that the industry behemoths follow suit if they’re seriously interested in crypto adoption above their bottom lines.

Should crypto exchanges scrap commissions? Add your comments below.

Images via Shutterstock

The post Why Crypto Exchanges Should Lower Their Fees and Profit Margins appeared first on Bitcoinist.com.

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