Digital currency exchange refers to a platform for matching transactions between digital currencies, digital currencies and legal currencies, and is the main place for the circulation and price determination of encrypted digital currencies. Compared with traditional stock exchanges, in addition to matching transactions, digital currency exchanges also assume the roles of market makers and investment banks. The investment bank role of the exchange provides services such as issuance and underwriting of digital currencies, from which the exchange collects currency listing fees, or collects deposits in the form of voting by the exchange community. This article analyzes the profit model of digital currency exchanges by selecting major global digital currency exchanges such as Huobi, OK, Binance, ZB, Gate, and ZBG.
Digital currency exchange refers to a platform for matching transactions between digital currencies, digital currencies and legal currencies, and is the main place for the circulation and price determination of encrypted digital currencies.
Compared with traditional stock exchanges, in addition to matching transactions, digital currency exchanges also assume the roles of market makers and investment banks. The role of the exchange's market maker can increase the liquidity of the market, and the exchange will earn the trading price difference from it. The investment bank role of the exchange provides services such as issuance and underwriting of digital currencies, from which the exchange collects currency listing fees, or collects deposits in the form of voting by the exchange community.
At present, most digital currency exchanges are centralized exchanges, which can be divided into legal currency exchanges, currency exchanges, and futures exchanges. Decentralized exchanges are exchanges that aim at the many drawbacks of centralized exchanges and the practice of decentralized consensus on the blockchain.
Three types of centralized exchanges for virtual currencies:
Fiat exchange
Legal currency exchanges allow users to convert legal currency into digital currency. Due to local banking regulatory regulations, the types of legal currency that can be traded on general legal currency exchanges are relatively limited. At present, there are 23 digital exchanges in the world that open legal currency transactions and have transaction amounts. There are two types of fiat currency exchanges:
One is the on-site exchanges such as Coinbase, Knet, etc. On-site exchanges refer to the trading methods that can directly purchase digital currency from the exchange through credit card or bank transfer.
The second type is called over-the-counter exchanges, including Huobi.com, ZB Zhongbi, etc. An over-the-counter exchange is a transaction method in which a user matches another user to complete digital currency payments outside the exchange through an exchange.
Coin exchange
The currency exchange allows users to convert the digital currency they already own into other digital currencies, and the entire transaction process does not involve any legal currency. Because of the relatively loose supervision, mainstream digital currency exchanges have opened this function.
Like the fiat currency exchange ZB, there is also a special currency exchange ZBG under the banner of the currency exchange. On the platform, you can easily exchange BTC for ETH, or BTC for other types of digital currencies.
Futures exchange
Futures trading has a high risk, allowing leveraged trading and is subject to stricter supervision by local laws and regulations. And the transaction threshold is high, and the audience is relatively small. At present, only 9 digital currency exchanges in the world have opened futures contract business and have generated trading volume. BitMEX is a pure futures exchange and also the largest digital currency exchange with a daily trading volume of more than 20 billion yuan.
The profit model of digital currency exchanges
Digital currency exchanges mainly make profits by charging transaction fees, project listing fees, and the digital currency market maker business to earn price differences.
Many digital currency exchanges also issue platform currency as a means of financing and the token of the exchange community ecology.According to incomplete statistics, there are currently more than 20 exchanges that have issued platform currency, including Binance's BNB, Huobi's HT, and OKEx. OKB, ZB of ZB, ZT of ZBG, DEW of Dew, etc.
1. Charge transaction fees
Transaction fees are similar to the transfer fees of transactions in the stock trading process. There is no trading platform that is free of fees. Trading platforms mainly rely on transaction fees to make money.
Many platforms currently known have a transaction fee of two-thousandths, and some exchanges that have just been opened have a transaction fee of one-thousandth, or some free time, and the relative fee may be relatively low.
2. Project listing fee
In the current domestic "currency speculators" transactions, the main method is for investors to use cash for off-exchange transactions to purchase "fiat currency" (that is, the circulating virtual currency recognized in a specific digital asset exchange), and then purchase the digital through legal currency A token issued by an issuer in an asset exchange.
For the token issuer, the mode of issuing a virtual currency on a digital asset exchange is similar to issuing new shares on an exchange. However, it is worth noting that since there is currently no supervision on the issuance of tokens, investors cannot tell whether the issuer is doing illegal cash out.
Globally, there are new digital currency currencies every day, and they want to enter the open market exchanges for trading. Compared with the domestic stock market approval system, there is no approval link for the listing and trading of digital currencies, and only the exchange charges a part of the "currency fee."
At present, if a token wants to be issued and traded on an exchange, the cost of issuance is mainly composed of three parts. Part of the tokens is given to the exchange to attract investors to register for investment, similar to the "wool" in P2P; the third part is that the exchange will require a certain percentage of tokens to be invested at a low price.
Regarding the scale of the collection of token fees, according to the reporter's understanding, different exchanges have different charging standards. Some charge several million yuan, and some charge hundreds of bitcoins, but they are all above the million level.
With the increasing enthusiasm of investors for overseas currency speculation, large digital asset exchanges have new coins online almost every day, and a lot of the exchange's income comes from project currency fees.
3. The digital currency "market maker" business earns the price difference
The digital currency market is booming. Another reason is that transactions must provide liquidity for token transactions, and market making is to provide liquidity. With the skyrocketing prices of many digital currencies, exchanges have acted as the driving force behind the scenes.
Since the exchange has to act as a market maker, it earns the price difference through buying and selling transactions with different counterparties, and the exchange will require a portion of the tokens to be paid to support the flow of the currency when many digital currency tokens are listed on the exchange. The security cost of sex market making.
And this part of the token has no cost to the exchange, so the cost of the exchange in the market making process is basically negligible.
The market maker of digital currency transactions creates liquidity through continuous buying and selling, acts as a market maker, and earns a business price difference at the same time.
Platform currency of digital currency exchange
The digital currency exchange itself is also an entrepreneurial team. After they issue platform coins in exchange for BTC and ETH, they can be sold on the secondary market and can be exchanged for legal currency to support the development of digital currency platforms.
At the same time, the platform currency mainly has the following functions:
1. Handling fee discounts, which are very common on platforms such as OK, Binance, ZB, etc.; 2. Enjoy platform dividends; 3. Voting on the currency; 4. After the platform repurchases, become legal currency; 5. As the base currency for platform transactions , Increase liquidity; 6. Enjoy the special activities of the digital currency platform, and pay for the activity by using the platform currency; 7. Become platform fuel (payment token for transaction fees). 8. "New currency", ZBG's ZT can subscribe for new currency in advance at a low price, similar to "new shares" in the stock market.
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