Is The Cryptocurrency Industry Hurt By Centralized Exchanges?

By Boris Dzhingarov

Exchanges are very important in the crypto industry. The centralized exchanges stand out as the first interaction with the crypto world for most people. Such services allow anyone to buy and sell tokens and coins. This is true for practically all of them.

What cryptocurrencies are listed dictate what is normally chosen for trading. As an example, when a person wants to trade a specific coin/token and it is not listed in the preferred crypto exchange, choosing another coin is what usually happens. This is due to the lower hassle associated with this than having to create a new account with another crypto exchange that has the specific crypto.

What People Do Not Know – The Listing Fees

The crypto exchange system does look simple but there are problems that become obvious when taking a closer look at the used business model. What you might not know is that exchanges make a lot of money through listing fees. They do make some cash through other fees but the big cash does come from these listings. In order to be listed on an exchange it is quite common to have to pay up to $100,000.

Contrary to popular belief, it is not hard to add a token or an ICO to a crypto exchange. This is what many do not know and should take into account. The smaller tokens and coins are basically punished because they need to raise these fees in order to be eventually listed. Being listed is often mandatory or volume would not exist. So much of the money that is raised by tokens and coins through ICOs end up moving to exchanges.

This big problem is the industry accepts this. People got used to the system and think the really large listing fees are absolutely necessary for the crypto exchanges to be active. This is not the case since we have to factor in taker fees, maker fees and even withdrawal fees. All these sum up to more than enough money to sustain a cryptocurrency exchange.

Struggling To Raise Funds

According to many in the industry, this business model of the crypto exchange is hurting the entire industry. Coins are valued only if they can raise money, which is not what is beneficial in the future. Those that have a really solid product behind them do not matter if they do not have the cash to pay the listing fees.

As an example, Binance is well-known for the incredibly high listing fees that can even reach 1 MILLION DOLLARS. This only happens because of the popularity that the crypto exchange enjoys at the moment. Kucoin does not charge as much, although amounts are still large. The Verify token team did say they had to pay $75,000 for a Kucoin listing.

Since diversity is a huge part of the entire crypto industry, it should be no surprise to see that there are different centralized crypto exchanges that did not adopt the high-fee business model. RightBTC is not charging fees when listing tokens. What the exchange does is have really strict vetting in place. So many of the decentralized exchanges also chose not to charge fees. However, in their case the only listings are usually tokens instead of coins.

Should All This Change?

It is impossible not to answer this with a loud YES. However, in order to see this change, people need to be aware of what happens. Centralized crypto exchanges do not talk about their listing fees. Such information is rarely released simply because they know that the community would be outraged. The exorbitant listing fees punish the smaller companies that cannot get listed, especially at the early stage of development. At the same time, the end user, the investor and the trader are also punished simply because variety is lower than what it could be.

As with every industry in the world, fighting with what the market leaders do is close to impossible. There are always financial interests that are considered and that influence everything. However, we are talking about blockchain and cryptocurrencies. Transparency is the foundation of the entire industry and these exchanges are practically not transparent.

So, is the cryptocurrency industry hurt by centralized crypto exchanges? YES!