What exchanges actually earn on: and why your hyperactivity is profitable for them

The exchange is the best business in crypto: the casino takes a cut of every bet regardless of outcome. Understanding its revenue explains the design of the entire product.

The revenue stack

• Trading fees - the base: fractions of a percent on every trade, multiplied by billions in volume. Hence the platform's main interest: for you to trade more often. The entire design - from push notifications to contests - serves this.
• Derivatives and liquidations: funding fees, and on some platforms, liquidation leftovers into the insurance fund. Leverage is the exchange's most marginal product.
• Listings: placement fees (publicly denied, privately standard) plus marketing commitments from projects.
• Earn products: the exchange borrows your coins cheaper than it lends them out: a classic banking spread.
• Proprietary market making: the most opaque line item - trading against client flow via affiliated entities. The FTX/Alameda story showed the scale of the conflict of interest.

Takeaway for the user

Nothing personal: the exchange is a counterparty with its own interests, and they clash with yours in exactly one place - the frequency of your trades. Every "gamification" feature is a CAC investment in your overtrading. Trade according to your own plan, not their push notifications.