A steady cohort of new crypto exchanges over the past twelve months has served to drive down trading fees across the board. Aggressive incentives are becoming the new norm and one exchange has taken the next step.
Coinmate.io, an exchange with over four years of service under its belt, has implemented a negative fee model for those who pass a monthly volume of €3,000,000 (three million euros). Traders will automatically be paid 0.05 per cent on further trades if they are on the ‘market maker’ side of the transaction.
Roman Valihrach, CEO of Coinmate, says: “The trend has always been to lower costs as the market matures, but I believe that negative fees are a world first among crypto currency exchanges.”
At first glance, the economics of negative fees would seem contradictory for a crypto exchange. If an exchange pays its traders – how can it function as a business?
Olga Bersheva, communications director, Coinmate, explains: “Among most exchanges ‘market maker’ transactions have lower fees because they breathe life into the market by improving liquidity. We justify paying customers to trade because we want to reward those who trade more and drive the market forward.
“The key to this business model is that Coinmate, of course, still gets paid by the ‘market taker’ side of the transaction, although those fees are on the very low end of the scale and also decrease with volume.”
Although paying traders to trade as part of the normal fee structure is a milestone, it is also a culmination of fierce competition among exchanges. The market is saturated and still growing. Currently there are well over 200 global exchanges and 500 regional ones, with more springing up weekly.