What are Maker vs. Taker on cryptocurrency exchanges? A quick explanation

If you’re new to trading cryptocurrency there are so many new words, memes, and phrases that you could need a dictionary just to get by. If you’re so new that you’re still a nocoiner, (someone who doesn’t own cryptocurrencies), start in the right end and get some experience buying bitcoin on a beginner-friendly site like Coinbase. P.S you even get $10 for free when you complete your first purchase over $100 if you use that link.ūüĎć

For the rest of you aspiring crypto-traders,¬†two of these words you probably came across are Maker vs.¬†Taker.¬† A concept so fundamental to trading cryptocurrencies, yet so misunderstood. But don’t worry young padawan, we’re here to explain it to you.

More and more cryptocurrency exchanges are moving to a Maker vs Taker-model for their fee structure. Much because of a big demand from their customers that, of course, wants to see lower fees. These reduced fees are given to the so-called makers in the market. These are the ones providing the liquidity on the exchange through either placing a limit sell above market price or a limit buy below market price.

On the other side are the takers, placing orders that execute immediately against a maker’s limit buy or sell.¬† Thereby taking, (hence the name), that liquidity of the exchange an paying a higher fee for it.

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Why are exchanges using this model? 

This is a model much requested from the exchanges userbase since it lowers the fees for active traders. But this is not only a win for the users but also the exchanges benefit from this. Increased liquidity from the Makers attracts more customers which compensates for the lower fees. This also stabilizes the prices of the cryptocurrencies which also attracts more customers that’s not looking for volatility. It’s truly a win-win scenario.

To recap this concept for you one last time this is what you need to remember:

Taker – you make an order which is going to be filled immediately.

Maker – you make an order that someone else is going to fill.

Makers pay lower fees to incentivize traders to offer up liquidity, (more money on the table), on the cryptocurrency exchange.

 

We hope this explanation helped you understand this concept more clearly and hopefully save you some hard-earned money in fees while trading!

 

Source: Kraken