Bitcoin Forum

Hi everyone,
We are three university students aiming to research about how exchanges such as Binance work. Since Binance has got a complex system, we were wondering if any of the members in this forum are informed about how did this project started, how does it work and based on the intense fluctuation of the cryptocurrency market how does Binance avoid losses and makes a profit?

What do you wonder exactly?

It is mostly about the money. Probably multiple tens of millions of dollars. Maybe even a lot more. To create a business as big as binance you need to have enormous amounts of FIAT before you start.
You need to have connections too. Mostly political but also need to know some decent coders&lawyers I imagine.
I remember kucoin and binance probably made their first appearances in the space about at the same time, though kucoin stayed much smaller and binance grew a lot bigger over the years.

Starting an exchange is more or less like starting a bank business. You need money and connections to make that money work...


Why would binance lose any money at all? All binance does to bring sellers and buyers together and make money (fees) from their trades.

They make profit by coin listing and transaction fees. Since Binance has a high daily trading volume and trusted by most traders it takes almost thousands of dollars for them to get listed on their platform. Of course, as one of the leading platform they do have some criteria to make sure they are not supporting shit coins. With the massive daily trade, imagine how much fees they collect daily.

I believe there are some cases that makes an exchange lose some money such as getting hacked, or probably due to some unknown bugs on the sites that may makes users get money that they do not deserved.
Of course I believe that a big exchange like binance has their best team to make a system and security to avoid what I've mentioned above but the chance of an exchange to lose money does exist.

There is a lot of programming behind of any exchange and this hel user to deposit, withdraw and exchange to credit deposit and also to get coins they withdraw, and also when people trade exchange get money from fees, and to build a high exchange a lot of money are needed and need to find a good team to build it.

You have these questions. First is this,

In what manner you would want to see on how Binance work?

I've been looking for their thread around 2017 as their start but this is all that I've found.

Binance Exchange - Let us grow together. Please provide us your feedback. (https://bitcointalk.org/index.php?topic=2656125.0)

Binance won't avoid lose, they don't trade but they gather fees from their traders.

as of most exchanges, the theory is the same, they live on the demand and supply which is created and manipulated in the market. so binance also works on the same points but whatever profit they make every year or month (after a specific time), they buy bnb coins from 10% - 20% of their profit and burn them. and because of this reason, the market faces less supply of the binance coins and so does the demand and price get increased. and that's why most people are in binance exchange.

Binance as we all know was established in 2017 and since then binance have been growing with it centralized mode of exchange operations it have listed several coins on the platform and also have they own binance chain which services they binance coin. Binance go through lots of process before listen any coin to avoid bringing shit coin inboard, and since binance is a centralized exchange it deal on p2p market system where even if the market crash binance will not lose.

Binance exchange started in 2017 and it just like other crypto exchange site which launched an ICO (https://icorating.com/ico/binance-bnb/) to attract fund to run their project but the reason why Binance gain the heart of many crypto  traders was because of it fast transaction processing with low trading fees.

How could they loss if they are just acting as an escrow.
Exchange platform are just acting as an escrow to those who wants to buy or sell their crypto.
They are making profit by the trading fee just imagine how much fee they are making from a single day.

I don't know exactly how they can operate in a crypto space which known has high fluctuation. There are to option to pay salary. They can pay their team with a fix amount of fiat money that is converted from trading fees, or they pay  in fixed amount of their native token (no matter how much their native token price).

Well, about how they started this. Binance has conducted a tokensale on June 2017 and raised about 15 Million USD. That's not a small fund anyway and since then they become the number one exchange in this crypto space, beated Bittrex.

They make money by listing new coins as they charge a handsome amount in BTC for the same, and in BNB (their own coin) through the way of transaction fees as well as the part they hold for development. Latest way for them to make money is by launching new projects there which we call IEO (Initial Exchange Offering).

Exchange doesnt lose profit. Users are paying percent of there listing of new coins, withdrawal, trades and all those percent are going to the exchange itself. They are just paying for tax, staff, website hosting and maintenance. Exchange that are well known are getting surely getting profits.

Exchanges function in multiple ways which allow every individual to complete transactions like trading and investing. They offer different services where you will be able to gain a good profit through buying and selling coins. It's a demand and supply cycle that makes the process run continuously.

I am not sure we know how they can make a profit, and I don't think that Binance will tell us how they can do that thing because it's related to their company secret.
Maybe you can find by yourselves from reading all the information you got from the search engine.
Besides that, we don't know how long they build the system so it could give them a profit in for a long time.

Here is a good read from reddit: (https://www.reddit.com/r/Antshares/comments/6jny7g/all_about_wwwbinancecom_info_in_english_as/). I even saw CZ replying on that post.  ;D. Anyways, just like any other business, I'm sure they have huge capital to begin with to hire the best programmers and then most probably CZ was always awake and on top of every release testing of his application. They charge a fee for every trading transactions you do so obviously they are making billions of profit as of 2019. (https://www.newsbtc.com/2018/11/10/how-has-binance-been-more-successful-than-coinbase-within-a-year/).

it looks like they were not having capital to do that when it was started and you can search the binance ico that has already ended at first july of 2017. Binance exchange site has used ico to get the funds and they had not used their own money. Binance started to hire more and more programmers after it was getting a big result in profit six months after ico.
https://www.ccn.com/binance-from-ico-to-the-worlds-largest-cryptocurrency-exchange-in-six-months

The revenue from the fees is nothing compared with revenue that comes from the listing a coin. I heard even an ico paid 5 millions dollar for listing on binance.

there are two types of exchanges in the crypto currency world, those are centralized and decentralized. these tow platforms act different kind of behavior. in centralized there are centered authority which handling transaction. for an example we send our assets for them they sell it for someone with our price and buyer send money for them and they send money for us. that is centralized decentralized is no handlers and we can directly make a deal with buyers. these tow ways add some transaction fee. 

Exchanges really aren't that hard to understand; their ability to make a profit lies entirely on their popularity and trust from the community, essentially.

The exchange exists as a middle man who collects deposits from users (depositing Bitcoin into the exchange) and allows for them to trade what essentially amounts to tokens on the exchange's respective crypto markets. Once users purchase and withdraw their crypto, the exchange sends some of the deposits they hold to the user's wallet.

To avoid losses, the exchange charges a transaction fee for every trade made on their platform, which pays for their various expenses like servers, internet, and the like. This is also how they make a profit, usually, along with whatever other revenues they generate from options being placed on their platform. They're not affected by the volatility of the market, and in fact benefit from it in most cases, because traders may be emotionally inclined to buy or sell their coins based on the market shifting. This results in an increase in the volume of transactions and, in turn, generates more $ for the exchange because of their transaction fees.

The most difficult portion of running an exchange is security. Everything else is just maintaining your infrastructure and minimizing downtime.

with the increasing number of ico who register in the exchange, of course this will further increase the price of exchange coins themselves. so that more and more traders will stop and give life in the exchange

listing coins fee depend on exchanges reputation.if they have huge daily volume trading and good security ofcours many projects and traders interested.moreover if they have feature community voting that used exchanges token.

Don't forget that decentralised exchanges exist too - the so-called Dex's.

For example, Open Ledger:

https://dex.openledger.io/

You don't need to pay a fee to list on a dex. The real question for researchers is why users prefer the centralised exchanges instead of the dex's. Is it because the centralised exchanges advertise and the dex's don't?

mostly all exchangers earn profits through fees if we check Binance last few year profits the profit percentage is huge

Exchange works when there's people who uses the platform,both traders and developers are bound to work together and exchange as the middle executer of any transactions that the two sides agree, exchange always got cut from transactions that's been created so the more the popular the exchange from the traders the more it will continuously gained profits.

I don't think there is any member here that knows more about Binance than you could find yourself on the internet. You should start working harder and dig dipper into the history of this company and I'm sure at some point you will surely find its origin and their comments when the company was created. You could also try to contact a member of Binance team and ask them directly for some information regarding their history even though I doubt you'll get anything.

Binance are centralised exchange, I believe their source code is not anywhere on the public repository, of course profits are from fees and coin listing but both are based on a strong cryptocurrency trading engine, you can catch a glimpse on how these engine works by checking out DEX

The listing there, as I have heard, is around 50 BTC. That's freaking a lot. Knowing how to get in there is like volume heaven for altcoins especially the go-to for traders. A lot of them are actually going to be exposed to many traders looking for investments or something.

I'm not sure about this but I think this list will answered how they earn through their exchange:

> Coin listing - If the project meet all the requirements required from their platform they will ask the project for a listing fee.
> Withdrawals/transactions - I think every coin listed their, if you withdraw it they will take some fees from it
> BNB coin - They have their own coin that supports their platform

So far here are what I've think on how the exchange earned from their own platform.

LOL, where you talked about them losing money got me laughing. These don't lose any money, they make a lot of money everyday, whether the trade you placed is a win or lose, they are making the money. These are platforms are for trading and they don't do it for free, you pay trade fees, and that's the money that goes to them.

Imagine how many traders are on Binance, and then check how much they charge as  trading fees and how many times people trade in their platform a day, then you will know these people are making millions of dollars everyday. So they are rich. As for how to start an exchange, not everyone can start up and run an exchange, if you don't have the money and the right connections, then you can't do it.

Perhaps the main problem for them (exchange) is the network where they are very careful every time hackers attack the system to take their money, hackers are the most worried and maybe the system they manage gets a big problem for everyone, the advantage is very much for get for Binance because Binance is a large exchange and accommodates many investors by obtaining fees from the registration of coins and the costs of any transaction, the way it works is just how to exchange other coins and can be used to trade or invest.

Binance doesn't fix prices for the trading pairs,only the traders who want to buy and sell register their desired price so eeryone just follow it based on their required profits.Buildig such trading platform is not such a complex one but their security system is one thing need to be considered.If they are very weak then hackers will find a way easier and steal all the money from the exchanges.

Binance is also subject to a lot of risk. They've got hacked again:

https://www.bloomberg.com/news/articles/2019-05-08/crypto-exchange-giant-binance-reports-a-hack-of-7-000-bitcoin


This is the biggest problem with centralised exchanges - they have a centralised source of vulnerability.

This the reason why a lot of coins never have chances to be listed in Binance, fees are just crazy just to have a place in there.
This is how Binance plays and still to be considered one of the best exchanges in crypto because of its volume and we can find good coins inside.

Theybare just the same to other traditional financial markets we already have like the stock amrket and the forex market. They are counted as only the brokers of the platform we are using and their jobs is to posts the buy and sell orders as well as match them for a fee. Even KYC is now a requirement for crypto exchange ever since the government has taken part with the industry. The only different thing I see is how cryptobexchanges put up their altcoins available as compared to stocks in the stock market. Compared to the stock market the ICO of an altcoin doesn't need to happen in that exchange as it can be made available in their platform even after the ICO has happened.

Three University students and doesn't know how exchange works? Silly. Even a kid can know it, let me ask you, where did you came from?

From the word itself. Exchange. Does it really bother you? That it has a different process? Oh yeah, online. It is a different way, yeah. Silly me.

Exchange doesn't work differently. It is still a matter of values that depends on the market. Thats all. Or you mean how the platforms works through blockchain? Or some other question. But if its the first one, don't be lazy fella.

I don't know whether or not some coins get free listing because of a great project but being in it would surely increase volumes. I don't think it's just that, having your coin there already says a lot, it could probably mean that you are serious with your coin or something. Not just a pump and dump coin.

You can google it actually, if I'm not wrong, because if you're going to ask for the details, then I guess it is too confidential for you to know. But creating a trading platform is a very expensive one, since you'll hire a team to make the exchange platform, who will make the maintenance, who will manage the funds, and so on. You can't make one on your own, because that would be too much for you too handle, especially if it is a big exchange platform.

And exchange platform doesn't care about the fluctuations of cryptocurrencies, either way, they are making money out of it.

They work like any other "Money" exchange, where people buy/sell different currencies and they pay fees per transaction for the service that the exchange offer them. The general trading fee is 0.1% <Trading fees are determined based on trading volume over a 30-day period.>

They also charge a large fee for Alt coin developers to list their coins on their platform to be traded by registered members of that exchange.  ;)

Some exchanges even charge fees to list ICOs that are verified by these exchanges on their platform to protect people with all the KYC/AML requirements that are needed to buy/sell tokens on these exchanges.  ;) 

Binance team started their career on the crypto platform as the ICO project two years before and now because of their hard work and increasing of the community pushing them forward to grow other than small exchanges.
When you want to be that much successful team you need to take care of the development of the site and product before the crowdfunding done due to current market condition.

Actually exchange works very simply, they only provide a place for traders to trade, they benefit from the market activities of traders such as selling, buying or withdrawing assets they have, just like the way foreign exchange or stock market works but in exchange of crypto currencies such as bianance of commodities traded are crypto currencies such as bitcoin and others.

Correct, every trading platform works the same, the only difference is that they have different approach in every altcoins. Like for example, in Binance, Ethereum price is higher than the price of ethereum in coinexchange, and so on. It is like a store which have different set of prices depends on the goods that they are selling, because if they all have the same prices, they won't make any profits

It isn't really that complex at all yet exchangers is just a business where building a platform which would handle out traders who do buy and sell cryptos.

How to make profits? They do get that from trading fees on each transaction made by traders and this is the way they do gain out and with such high number of
users then its just normal to think that they are really reaping out some good profits.

The price difference came from the trader,exchanges just providing the place for trader and all other things done decentralized manner there maybe some manipulation on the prices but you can set your own price and can wait for the order to come.

If someone has the Bitcoin in their and they want their country currency then they will do it like exchange in the rivers process if someone had their own country currency to buy the Bitcoin then it will enter into exchange method and it is a normal process.

How do they win? If you open a position only with Stop Loss, the movement of the currency may occur until the trader considers that he has already won, but in case the trader sees a rise in his position and does not want to close it to take his small profit but that leaves because it thinks it can continue to grow, the currency can suffer a fall that touches and take the Stop Loss, then you would be moving from a winning position to a losing, it is totally legal, but restricts the trader to be able to set their rate of profit If you do not touch your profit level, and in case the trader is not pending, you can go up very fast and not give you time to take your profit.

The other way is to open a position only with Take Profit, which the trader expects his currency to rise to where he left the order to take profit, but in case there is no movement, but the market becomes bearish and begins To fall a lot, you would obviously have a substantial loss because you can not place a Stop Loss, and here obviously the Exchange takes profit legally.

These ways are what this type of Exchange has, everything would be solved if for a position they could open both characteristics as it happens in Bitmex and in Bitfinex.

Another way they have to win is that the Exchange knows in what points the resistors and ceilings are really, then according to this information, they can open positions with certainty and be able to win, this is another way that obviously many Exchanges apply it, and the ones in charge of this are the Bots.

Different exchanges have different ways they work because it involve different programmers. What i do is that i watch videos online on how to use a particular exchange .

My opinion about how exchange is working based on how supply and demand, after listing on exchange market seller and buyer is the most important make how exchange working with price they buy and sell order.

Im not sure when you are talking about the centralized exchange site because they have used the same methodology but they only have differences in its future and service. that will be different when it comes to the decentralized exchange site in any network because the composition of any platform with another platform will differ from the whole aspects.
But he was asking about the strategy used by binance to get profit. provide more services that will get a lot of demand and charge big fees for that as a major exchange site.

Actually my fellow students in my university are also conducting a crypto-related research. Think about the platform first and the storage of your project. This whole project was full of programming codes so It might take you a lot of time to create a Binance-similar exchange site. Are you going for a research only or a project for getting a profit? What did you think off about it? Decentralized or centralized? Please be specific on the conditions. Because if it's centralized and for profit, you need investors or sponsors to support your project to be implemented but I don't think it's easy for a group of 3, still kudos to you guys!

You need a huge sum of money before you can build up an exchange, this is for salary of the staff, developers, equipments, etc. You also need some good connection on the government and Malta is very open for cryptocurrency start up that's why they moved there. Binance exchange get profit from coin listing fees and trading fees, i think the only time that an exchange may loss profit is when they got hacked.

there are two types of exchanges if someone wants their Bitcoin to be transferred into the normal currency then second use exchange and makes the the transfer easily with some fees and this is the profit for them and if it reverse process then it also called as exchange.

They getting new customer and become member to trading them exchange, then they getting trading and withdraw fee while customer did on exchange for trade, Profit gotten. Binance is good one exchange when people going to get what they dream to buy lambo, then getting gready to get losses without skill trading.

I think for those who want listings in binance, they must pay the listing money, besides that by using the transfer fee they get money. on the other hand the more people need binary coins, the higher the price of the coins

I think Binance has already dominated Malta, and it would not be right for smaller exchanges to go there again, except they have very strong competitive features to compete with bitcoinor has any offer they can give to Maltagovernment that will be higher than that of Binance. We still have some other smaller and big countries that are cryptocurrency friendly, I think Russia is also friendly; Huobi has already dominated china because that part of Asia prefers to deal with Huobi.

Irrespective of all these, any good exchange should still be able to operate anywhere provided they are not avoiding task, because I think one of the reason why Binance moved from US is to avoid task, and that is why US is still having some issue with them now.