Binance is the largest cryptocurrency trading platform worldwide in terms of trading volume and isavailable in more than 140 countries. The brand has become synonymous with crypto due to its low fees and the wide range of tokens it supports.
Changpeng Zhao founded Binance in 2017 as a trading platform based in Shanghai, China, specifically designed for trading cryptocurrencies. It has since moved headquarters to the Cayman Islands due to the Chinese government’s increasing regulation of crypto. (Crypto was used by many in China to get wealth out of the country.)
By Sept 2022, Binance reported average daily volumes of 2 billion and over 1,400,000 transactions per second on its global platforms, unsurprising given its low fee structure and integration with most crypto trading bots.
But it has grown to be more than just an exchange. Binance has its own stablecoin (BUSD) and blockchain (Binance Coin).
There are a lot of ways Binance makes money. Scroll down for more detail on how.
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What does Binance do?
Today, Binance is a popular cryptocurrency exchange specially designed for experienced cryptocurrency traders. Relatively low trading fees, together with a wide selection of cryptocurrencies for global trading, make it popular. However, trading options on Binance.US, its US-specific brand, are comparatively limited after it ran into regulatory issues.
Since its launch, Binance has extended its reach beyond mere crypto trading to include a range of derivatives, including futures, options, and non-fungible tokens (NFTs), a type of cryptographic tokens representing unique blockchain assets.
Binance helped to popularize DeFi with its range of crypto cards, staking rewards, and crypto loan products.
How does Binance work?
Globally, Binance users can trade in more than 365 cryptocurrencies and currency pairs depending on their location. However, what’s available on the U.S. platform is greatly constrained. International users benefit from the fact that Binance supports several fiat currencies, including AUD, EUR, GBP, HKD, INR, and USD.
In addition to the Binance Coin (BNB), Binance users in the US can trade in the top large-cap cryptocurrencies (BTC, ETH, ADA, SOL, etc.) and a limited range of altcoins and DeFi tokens such as DOGE, DOT, MATIC, etc.
Binance is renowned for listing new coins, and, as a result, traders have access to hundreds of altcoins and memecoins as well.
How Binance makes money
Binance makes money from trading fees, margin fees, interest on crypto loans, spreads, withdrawal fees, and fees from the broker program. It also makes money from cloud offerings, mining services, interchange fees, and profits from its investments.
Trading fees generate the bulk of Binance’s profit. They administer a 0.1% spot trading fee and a 0.5% fee known as a buy/sell crypto fee.
If you have BNB in your trading account, any crypto investments will be deducted from this total. Traders with this option pay a fee that is 25% less because they have BNB in their accounts.
Trading fees will vary based on the trading volumes over 30 days for individual traders and institutions. Expect lower fees with a lower trading volume and higher fees with larger trading volumes.
Binance also makes money from the trading fees charged by other crypto exchanges running on the Binance Broker Program.
Binance calculates margin account interest rate on an hourly basis. So if you borrow funds for one minute or almost one hour, you will be charged the same.
Deposit and withdrawal fees
Binance does not charge deposit fees for crypto. However, they charge a withdrawal fee based on the receiving wallet’s location. Withdrawal rates depend on blockchain networks and may fluctuate without notice because of factors like network congestion.
Deposits and withdrawals of fiat currencies have a fee. USD deposits by wire transfer via SWIFT or Signet do not carry a fee. USD withdrawal fees in the US (domestic) come at a $15 fee, while international wire transfers come with a much higher fee ($35). Deposits or withdrawals via an ACH transfer have no fees.
Using a debit card for deposits will incur a fee of 4.5% on top of other fees. While internationally, Binance users can use credit cards to purchase crypto, Binance.US users cannot make credit card purchases.
Interest on crypto loans
Binance’s crypto-backed loans are available from 7 to 180 days. Users can utilize their crypto holdings on the platform as security for loans. Binance makes money from interest charges.
The interest rate depends on the amount borrowed, how much collateral is posted, the type of currency borrowed, and the selected repayment period.
Interchange fees on crypto card transactions
Like banks with fiat currency debit or credit cards, Binance generates revenue with a transaction fee charged when users spend or withdraw fiat cash at an ATM using a Binance crypto card.
Mining pool fees
Users will have to pay a 2.5% pool fee on Bitcoin and a 0.5% fee on Ether to participate in Binance’s mining pool. BCH, LTC, and other coins can also be mined. The fee relevant to each cryptocurrency being mined is applied while using Binance’s mining pool.
Future growth engine
Binance benefits from its dominant position in terms of global volume. Demand for cryptocurrency trading platforms is expected to increase as more people invest in cryptocurrency.
Binance offers features that attract experienced cryptocurrency investors.
As such, skilled traders and investors who have benefited from the popular platform are likely to recommend their friends to sign up for investment accounts with Binance.
Cryptocurrency values are influenced by local and worldwide current events in politics, government, eCommerce, and more. Increasingly, more national governments are embracing crypto, as are individuals and businesses worldwide. As the world continues its speedy adoption of blockchain technologies and more innovations come on board to make that happen ever faster, the values and volumes of cryptocurrencies will rise and fall. These global trends encourage more crypto use and larger trading volumes, helping Binance, already the largest by global trading volumes, to make more money and bigger profits.
Coinbase, Kraken, Gemini, and Huobi are the closest competitors of Binance.
- Coinbase started much earlier than Binance and is based in the United States. Coinbase (NASDAQ: COIN) operates a bitcoin wallet and platform, and trails close behind Binance in popularity. It is seen by many institutional investors as the most trusted and reliable onramp from fiat to crypto.
- Kraken, founded in 2011, is a global bitcoin exchange. It allows users to trade in USD, CAD, ETH, XRP, LTC, among other digital currencies. Compared to Binance, Kraken offers a much narrower range of products and services to crypto users. Gemini is another competitor and is rising in popularity. Gemini is more popular than Kraken.
- Huobi is a Singapore-based global blockchain asset financial service provider and a crypto exchange platform. It was founded in 2013 and is growing quickly.