Topic: Who's Raking in This Fee (Read 326 times)

Thank you for this valuable Post and answer mate , Have been asking about this same question
for long why it seems that the said Transaction fee seems to be lesser from what the exchange taken from me after the
said transaction , sometimes since it is just a small amount i did not pay attention but now that you posted this then I
 may try checking each transact i made to see which exchange ask for more and whom are lesser.

and to OP thanks for your thread as I now know what is happening to each of my transactions that keep
bugging me for such a time now.

Exchanges are not the ones confirming your transactions, miners do, do irrespective of the transaction made and the wallets use from sending them, they were all going through the same blockchain to be confirmed by the miners and they receive the reward through the transaction fee they set, exchange will charge you for making the transaction but it's not going directly to their own purse, miners receive it and they also make their own charges on each transactions you made since they are centralized exchanges, they need to make money as well through their users.

A very good question you have asked here, I also used to have this question but hey the basics also applies here which is the one who will process, validate or confirm our transaction; who is the miner, will get the fee as reward for doing work. But in terms of Binance or any other centralized exchange, who is taking the responsibility to make the transaction from your behalf will charge some money from you and remaining money will be used to make your transaction.

Now you must be wondering, the fee they charge you is not that much even might be lower than the one you pay when making transaction from Electrum, the answer will be, they make bundle of transaction into single batch that way they have to pay lesser fee and don't forget that they have there own mining node means they also process the transactions but its not easy and for sure that they will get to process all the transaction by themselves due to many of the reasons.

The point is, when making transaction from Binance, you don't own the wallet or control the wallet, you are just giving command to Binance when you hit Withdrawals command, that make this transaction and they will make it for you.

Hmm, Quite acceptable, but saying that their whole ecosystem is working on such commission-based fees and transaction fees sounds unreal. I know you've not said I'm just putting my view on it can't be neglected that they charge massive coins listing fees and launchpad fees, and the BNB network can be an overview.

In the centralized platforms, they even use your funds as liquidity to make massive amounts, they utilize the sponsorships, and much more to afford their ecosystem expenses and heavy gains.

There should be no big deal on that, whether in Decentralized Exchange or or Centralized Exchange or custodial wallet or custodial wallet, the mining fee is taking by miners because without miners no block will be confirmed in the process of transition. When you make the transaction from the centralized exchange to another wallet address, the transaction must enter the blockchain and once it entered the blockchain as I said miners will detect it and confirmed.

Now the way Binance is making money is, in the transaction, the fee is a little bit higher than the normal fee and there Binance will take there commission and miners will also take the rest.

Both Binance, or any centralised exchange, and the miners are raking in this fee. They are both making money on the fee. So this is how it works: when you make any transaction using Electrum or any other non-custodial wallet, you are directly dealing with the BTC blockchain because these wallets are also known as SPV, which are simpler versions of the BTC node wallet. And when you make a transaction from Binance,

They first deduct some commission and then combine your single transaction with a bunch of other transactions into a single batch. They then make transactions directly into the BTC blockchain on your behalf, and they also pay the fee, but the fee on a single bundle comprising many transactions is less than the fee on an individual transaction. That's why they are able to make a commission on it too.

Exchange withdrawal fees ≠ transaction fee.
Usually withdrawal fees are much higher than the recommendation of transaction fees, since it is a business, exchange make sure that they won't cover all the fees from their own instead they collect it to all users who have withdrawal request at that time then have make a schedule to make a single transaction from those users' withdrawal request.
That's why they (exchanges) somewhat earn from user's withdrawal request too.

Your withdraw fees has a combination of miners fee and service fee, some exchange are greedy and overcharge while they send out the withdrawal request in batches (which is why you don't receive your withdrawals immediately you request for them) only on exchanges that has lots of volume that you'll receive your withdrawals almost instantly even though the miners still have to confirm the transaction but you can see that your withdrawals has been processed on the blockchain. Alot of centralized exchange are stealing from their customers but people don't know about this or they know but there's nothing they can do since the fees aren't hidden but made know on the withdrawal page.

CEX is a business so they need to make profits to stay in business (pay their workers, maintenance and other charges), they have various fees they charge like trading fees, withdrawal fees and other charges for products that they offer. For your question, the miners and the CEX platforms shares the fees but a majority goes to the CEX for those overcharging for withdrawal. I know of some platforms (not exchange though) they charge less and use a higher fee to process users transaction and this goes to show platforms that truly cares about their customers.

When you send transaction, the miners are been compensated for making it through and in return, the fee is not the only thing they get, they get the block reward + the transaction fees they compile all together in a block, that's how the miners make money from mining bitcoin.

For the centralized exchanges, when you buy bitcoin from them, what you get is not actual bitcoin but numbers, what they give you is data. It's anytime you want to withdraw they give charge you and when they do, it's not for them to use but use as fee to get your bitcoin to your destination address. Buts not all, there is a plot twist on centralized exchanges take fees from their customers. Let me explain;

When you withdraw bitcoin from any centralized exchange, their charges are constant fee even if the mining fee is below 10 sats per vbytes. They will charge you like 0.00038btc(from Binance exchange) which is around $13.5 when what they need to run your transaction might not be more than $3 and when they successfully send your transaction, they keep the rest of the bitcoin with them, you see the plot twist I was telling you.

When the fee get increased again, they increase the withdrawal fees more than what is required for you to run your transaction, that's how centralized exchanges work and milk their customers every blessed day.

CEX make money through:
1. Trading fee (taker & maker).
2. Endorsement.
3. Listing to their exchange.
4. Lending service.
5. Own token.
6. Dormant fee for inactive account.
etc.

There are many ways they're make money which I think more than enough to pay server, domain, employees or anything that related to internal.

They're not give any donation to the miner, it only happens if they send higher than the highest fee at that time.

More profit for us you suckers thank you for using our scummy centralized exchange.
Next victim step right up and we'll screw you in fees too take the profits and keep them for ourselves.

OK @stompix thats perfectly plausible explanation, what prize do I win?

-Dave

these exchanges need to earn some money to function
hence why most transaction fees of centralized exchanges are incredibly high especially with larger amounts of transaction
i’m guessing they give a percent to the miners
but keep some for their own must be why the transaction fee is so high

Well, they all do but at the same time they don't to this extent, because the moment you have garbage like this in your fees, it stops being shady and greedy and becomes a complete middle finger to every BTC user:


I dare anyone to come up with a plausible explanation for this one

All centralized exchanges do the same like Binnace as I know. I really don't like it because when I use an exchange, I consider they have to build up a platform with security infrastructures, wallet maintenance and so on. I use their exchange and pay trading fee to them that is their income. Taking profit from user withdrawal and say it is taken because they need the money for security, wallet maintenance is very shady and greedy.

But it is fact on centralized exchange and if anyone uses it, it's unavoidable.

Miners win in both scenarios, no matter what the Cex does or charges the miners will still get paid the same fee in both examples, that is when we look at it in sat/b, so they will charge the same for the same space in the block, they don't care who is paying or what that tx is about.

Now, about the CEX there can be two scenarios-
- the CEX charges you extra for each withdrawal or already has a standard fee that covers it pretty well, so they make a bit of money
- the basic withdrawal fee the CEX charges is smaller than the fee they pay, even if they batch transactions so they will pay the remaining out of their own pocket in order to not piss users

For example, Binance charges 0.00038, around $13 , enough for a 1input one output tx, but since they batch them by the dozen,
https://mempool.space/tx/e9bf06b9752e541b9b586506961513b48c461b41ad21afe912cd944b627cfda3
they can afford to pay 411 sat/vB  for example, and still make a profit.

Any transfer of funds within the EXCHANGE is a change in the balances of their database. If you transfer Bitcoin from your balance to your friend’s balance on Binance, all that happens is that the values in both accounts are updated.

Any transaction outside the platform is exactly the same as a Bitcoin transaction as when you want to send money from your wallet to your friend’s wallet, and here the fees go to the miners. You can pay very low fees, but then you will need to wait a long time for your transaction to be confirmed.

Most CEX calculate miner fees as withdrawal fees, but they differ from the fees that are paid as they vary according to the nature of the network, but they are usually more than miner fees and are fixed it for long periods rather than changing every few minutes.

No matter what type of wallet, every transaction involving the blockchain, miners will receive a share of the benefits according to their portion (block reward) and this must be fulfilled or the transaction will fail. As for who top ranked, exchanges can adjust the "reward" level at their discretion. The answer is, it depends on which exchange you are talking about.

When you send your bitcoins from a decentralized wallet, the fee is deducted directly from the miner.  But when you withdraw Bitcoin from CEX you won't see a lump sum fee because different exchanges set different withdrawal fees.  In which case the exchange will pay whatever the transaction fee is at that time. If the fee is low, then the exchange has some profit and if it is high, sometimes the exchange has a loss. But most of the times the exchange charges more than the lump sum fee

Yes, it's the miners who are going to profit from it directly.


CEX platform will still pay the miners to find the block for your withdrawal, and then it will be pass to you, not sure how much the CEX is making money, but there could be percentage. And that's why you don't have total control of the fees because they are the one setting it so that they can make a profit. And obviously, that's why in this kind of situation that the fees are very high, CEX could be putting like +10% or more on fees on you.

Most exchanges if not all charge a transaction fee that's usually higher than the actual network fee, so the deal is both the exchange and the miners are raking in profits. It makes sense, though. When you're on an exchange, every transaction you do comes with a slice taken out because you're using their platform. Whether it's trading fees or withdrawal fees, they're making money off each move you make.