Have anyone imagined how the order book on any exchanges, in this case, crypto exchange works? Let’s dive into this to understand who are those that make this happen.
There are two sets of people who make trading on any exchange possible, the first one is makers and the second one is takers.
Who are makers
Makers also called creators or market makers, are individuals or firms that buy or sell assets for their own accounts. Makers are the lot that makes an order book on the crypto exchange and provide liquidity to the market.
Makers are the ones who place the limit order with a value or price different from other markers in a market at a certain time. Makers make a profit from the spread between the bid and ask price, as they risk holding the assets while the prices of the assets could decline. They use all sorts of operations to gain profit.
Looking at the market for the price of its assets, the maker can increase the price or decrease it and somewhat agree to the condition of the taker to execute the operation.
Who are takers
Takers are the lot that completes the order book by buying an asset at the asking price. They are also known as liquidity takers or market takers. They are the ones who accept the price that the maker has set to sell his asset. Takers buy the assets believing that this will provide value for them in the short and long term.
Any person or a firm who participates in the market and agrees with the operations and its conditions to settle the order book becomes a taker.
Advantages of makers and takers
As mentioned, both makers and takers play an important role in keeping the liquidity of assets alive. They both allow the price of an asset steady or in other words, under control.
If there is no liquidity, there is no way of buying and selling the assets, which is harmful to the value of the assets. At least to an extent, we can say that both, makers and takers keep the asset free from market manipulation.
Makers and takers enable the market to remain active and stable as more and more users get attracted to the market to complete the order book.
As many users are competing to fill the order book, it brings healthy competition between makers to provide more liquidity to the market to obtain the best rates. This provides a place for investors and traders to invest assets, thereby increasing the volume of trade and making better profits.
What are maker & taker fees?
Makers and takers are both charged fees for trading on an exchange. As makers provide liquidity they are charged fewer fees. The fees for markers are -0.01% (In that case, they will be paid in KLV to trade), whereas takers are charged more because they take away the liquidity from the market.
Looking at the role both makers and takers play in the functioning of an exchange, they are the first ones that attract new users to the exchange and healthy competition is a must for any exchange to excel in trading.
Indeed makers and takers play an important role in any crypto project to gain massive adoption and create value for its holders.