How The Exchange Gets BTC From The Blockchain

[Kongxx]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

But an exchange is not the creator of BTC.

Does the exchange take BTC free of charge from the blockchain?

For insntace, in an exchange, the fee is 6.99%. When I buy BTC from the exchange using a card, I pay 106.99%.
6.99% is the profit of the exchange.

So who keep the 100%?

[mk4]

Exchanges are just mediators of users that buy/sell bitcoin. So if you buy bitcoin, you're buying coins that other people are selling on the platform, and vice versa. Exchanges just put in a small transaction fee so they can profit off the trades. The same reason how when you buy something from eBay, you're buying it from other people; and eBay just adds a fee for their profit.

In the first place, if exchanges can just freely "take BTC free of charge from the blockchain", then bitcoin wouldn't be this big.

[TheUltraElite]

Does the exchange take BTC free of charge from the blockchain?

Someone sells those bitcoins to the exchange. There is where the "Liquid pool" comes from. If there is a dearth of the sellers then the price of bitcoin will go up and the exchange might stop bitcoin to other conversions for a period of time.

The only way to "mint" is to mine it and exchanges dont do that. Besides the miners who are into full-time mining are often found to be selling away the bitcoin that they get as block subsidy on top exchanges and therefore the liquid pool of bitcoin remains in place.

The reason why miners sell their coins is because they need to ROI the investment which they started as mining - reason why today mining is a such a competitive field and indie miners have no place.

However to prevent the miners from over selling and making the market crash there are the halving points where the block subsidy is halved with each event and this keeps check on that dump.

[Kongxx]

Does the exchange take BTC free of charge from the blockchain?

Someone sells those bitcoins to the exchange. There is where the "Liquid pool" comes from. If there is a dearth of the sellers then the price of bitcoin will go up and the exchange might stop bitcoin

Who's someone? How can he get the BTC from blockchain? The owner of BTC.  is satoshi. I see that the exchange gets the BTC from blockchain using ways that normal people cannot do but then sells to people requesting money from buyers.

[TheUltraElite]

Who's someone? How can he get the BTC from blockchain? The owner of BTC.  is satoshi. I see that the exchange gets the BTC from blockchain using ways that normal people cannot do but then sells to people requesting money from buyers.

It can be anyone who is selling their bitcoin. Any random user like you me, one who has bitcoin with them can sell them. Minting BTC is only possible from mining and getting the block subsidy. Owning BTC can be by buying it or earning it from someone. That is why the miners generate a lot of liquidity to the market until the maximum minting of bitcoin is completed, after which all the bitcoin is the market will only change hands no more BTC will be mined and injected into the supply.

The owner of bitcoin is none. Bitcoin is people's currency. Satoshi does not own all the bitcoin that is minted by miners. Satoshi only owns those coins that are in the private keys that they control. Similar with anyone else's bitcoins, the private key that you control, gives you ownership of those coins.

[NeuroticFish]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

What have you done on this forum since 2017?
So many years and you understood exactly nothing.

Most exchanges don't sell Bitcoin themselves. In those exchanges, users sell and users buy, the exchange only matches orders and takes a fee.

For example miners go to exchanges and sell the coins they mined.
If you'd read you know that every mined block comes with a reward. Every transaction sent contains a fee that also goes to miners. Miners earn coins for the electricity, gear, effort. Those coins are not handed out by Satoshi from his (virtual) bag.

Also people who has bought at some point may sell now. There are people that buy and sell all day long earning money from their trades (also some who don't know how things works will lose money too).

There are also exchanges that sell you bitcoins directly. What they do is buying coins from the exchanges from the first example and sell them for you, getting an extra fee for doing this for you.

I hope that it's clearer now.

[avikz]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

But an exchange is not the creator of BTC.

Does the exchange take BTC free of charge from the blockchain?

For insntace, in an exchange, the fee is 6.99%. When I buy BTC from the exchange using a card, I pay 106.99%.
6.99% is the profit of the exchange.

So who keep the 100%?

Who said you can't buy bitcoin from miners?? It's just that you need a deep pocket. Do you think the institutional investors buy from exchanges with commissions? Certainly no! The deep pocket investors buy bitcoin directly from the miners at a discounted price. That is only possible when you have a deep pocket!

Now exchanges are business entities so they would need to charge commission to keep their operations running. Otherwise no exchange would survive. That's just business!

[zasad@]

A commission is charged for every payment made on the bitcoin network.
Bitcoin Avg. Transaction Fee historical chart
https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
You should consider the cost of commission for small payments.

https://cryptofees.info/
This is a good analytics on fees in well-known blockchains.

You can buy bitcoin for 500 dullars on a P2P exchange, but you will pay another $ 50 in commissions.
Before any deal, consider which is more profitable. Sometimes it is more profitable to pay 6% commission to a crypto exchange

[acener]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

But an exchange is not the creator of BTC.

Does the exchange take BTC free of charge from the blockchain?

For insntace, in an exchange, the fee is 6.99%. When I buy BTC from the exchange using a card, I pay 106.99%.
6.99% is the profit of the exchange.

So who keep the 100%?

Exchange act as a midman for those who wants to buy or sell Bitcoin.
We don't buy directly from them we are buying from other investor who wants to sell their coin on the exchange.
They don't get it from the blockchain they are only hosting the trade and showing the buy and sell order from their users.

[noorman0]

@OP, have you never traded on an exchange? How can you assume that the bitcoins that are sold on the exhcange belong to the exchange?

-snip-
People cannot buy BTC without an exchange.
-snip-
So who keep the 100%?

You are wrong, people can buy bitcoin directly even face to face. But still, when sending BTC, you have to charge the miner a fee which is taken from a portion of your bitcoins. This means that even the bitcoins that you store in your personal wallet are not 100% yours, but some are owned by miners depending on how many transactions you make.

What have you done on this forum since 2017?
So many years and you understood exactly nothing.

OP is an active thread maker since 2017 then gone, so I doubt if he reads other people's replies afterwards and never learned anything.

[mk4]

Who's someone? How can he get the BTC from blockchain?

Other people that are converting coins<->fiat on the exchange. The only way to "get the BTC" is to mine it, or buy it. You can't just freely generate bitcoin at will.

Who's someone? How can he get the BTC from blockchain? The owner of BTC.  is satoshi.

Satoshi is the founder of Bitcoin, not the owner. Huge difference there.

I see that the exchange gets the BTC from blockchain using ways that normal people cannot do but then sells to people requesting money from buyers.

Read my previous response.

Exchanges are just mediators of users that buy/sell bitcoin. So if you buy bitcoin, you're buying coins that other people are selling on the platform, and vice versa. Exchanges just put in a small transaction fee so they can profit off the trades. The same reason how when you buy something from eBay, you're buying it from other people; and eBay just adds a fee for their profit.

In the first place, if exchanges can just freely "take BTC free of charge from the blockchain", then bitcoin wouldn't be this big.

[DannyHamilton]

Who's someone?

Someone is anyone that already has some bitcoin.

How can he get the BTC from blockchain?

By mining bitcoin (providing transaction confirmation service and receiving the block reward).

The owner of BTC.  is satoshi.

No.  Satoshi is the CREATOR of bitcoin.  There is no OWNER of the protocol or the software or the network.  The owner of any value of bitcoins is the person (or persons) that have access to the private key needed to spend those bitcoins.

I see that the exchange gets the BTC from blockchain using ways that normal people cannot do but then sells to people requesting money from buyers.

You see incorrectly.  Fix your eyes, then fix your education.

[stompix]

Who's someone? How can he get the BTC from blockchain? The owner of BTC.  is satoshi.

1) Miners get new BTC foer every block they mine.
2) Miners sell to other people, on exchanges, on OTC deals.
3) As every new owner sells BTC on an exchange he is selling them to a buyer with the exchange as a mediator.

Simple enough?

So who keep the 100%?

The guy selling at number 3.
Btw, by your logic, if when somebody buys from exchange the exchange gets bitcoins from the blockchain, does it mean that when somebody sell them they get destroyed?  

What have you done on this forum since 2017?
So many years and you understood exactly nothing.

Weird, I would have expected him to be a complete bounty hunter only with bounty posts but it seems like he is a bitcoin owner for more than 4 years, and using electrum, not an exchange.

Who said you can't buy bitcoin from miners?? It's just that you need a deep pocket. Do you think the institutional investors buy from exchanges with commissions? Certainly no! The deep pocket investors buy bitcoin directly from the miners at a discounted price. That is only possible when you have a deep pocket!

That's not completely true.
There are thousands of small miners who only make a small amount, mining with 2-3 machines, those people will get their payout from the mining pol and then convert the money for themselves, only a few pools with deep enough pockets afford to pay the miners from their extra funds and deal via OTC for their fresh coins with big buyers.

[sheenshane]

IMO, the answer is, those exchange doesn’t get Bitcoins from blockchain, they're not even associated with Bitcoin as well.  They also don’t own most of the Bitcoins in their exchange.  IIRC in my calculation, mostly, they only have own 10% of Bitcoins circulating in their platform and 90% of it comes from us (the users who sell and buy from their exchange)  Aside from those big exchanges platforms that already collected a big amount of their hot storage wallet.

They're a platform that people can sell their Bitcoins and also buy.  Meaning to say that, they somehow act as a mediator or an escrow for transactions and that's where they are being compensated as they get percentage through transaction fees.  It might 100% of the Bitcoin as you mentioned will then be returned to the seller.

This is actually a great business model it’s just that, founding an exchange is really a headache.  So I think users can only be more grateful for their sacrifices by acknowledging their hard works providing us platforms that we enjoy today.

[harapan]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

But an exchange is not the creator of BTC.

Does the exchange take BTC free of charge from the blockchain?

For insntace, in an exchange, the fee is 6.99%. When I buy BTC from the exchange using a card, I pay 106.99%.
6.99% is the profit of the exchange.

So who keep the 100%?

I want to add to what other members said. The fee that was paid to facilitate the transaction for the purchase of the BTC between you and another seller on the exchange's liquid pool, the exchange gets to earn a percentage from each transaction and that's how most of the exchanges we know and use today including the big, household names makes their money from trading fee commissions. Exchange do an awesome job in ensuring that assets are liquid. That's why I'm not concerned with their charged fee except its high compared to normal.

[nullius]

Does the exchange take BTC free of charge from the blockchain?

Someone sells those bitcoins to the exchange. There is where the "Liquid pool" comes from. If there is a dearth of the sellers then the price of bitcoin will go up and the exchange might stop bitcoin to other conversions for a period of time.

That’s not how traditional (centralized) exchanges work.  Look up the concept of an order book.

With “liquidity pools”, it seems that you are thinking of defi AMMs; but those aren’t exchanges in the same sense that OP is (un)thinking about.

Centralized accountless exchanges may to some extent act as market makers selling their own inventory on both sides of a (very wide) spread, but IIUC most don’t (or only do to a limited degree).

Exchanges are just mediators of users that buy/sell bitcoin. So if you buy bitcoin, you're buying coins that other people are selling on the platform, and vice versa. Exchanges just put in a small transaction fee so they can profit off the trades. The same reason how when you buy something from eBay, you're buying it from other people; and eBay just adds a fee for their profit.

^^^ This.

[AGD]

Just to clear OP's misconception and add a little more:

If you use a regular exchange to buy Bitcoins, this transaction will NOT appear on the blockchain. It will be stored in an internal database of the exchange and all the trades that happen on this exchange are not taking place on the blockchain. Technically the Bitcoins you bought are not yours until you withdrawal your Bitcoins into one of your own wallets, because the exchange holds the private keys of your Bitcoins. Your withdrawal will appear on the blockchain and after a few confirmations these Bitcoins are truly yours.

If you want to sell your Bitcoin, you transfer your Bitcoins from your wallet to the wallet of the exchange (on the blockchain!). Your Bitcoin trade on the exchange will NOT appear on the blockchain, as it is done on the internal database of the exchange. Technically the fiat money you got from the Bitcoin sale is not yours until you make a withdrawal into your bank account and cash out, because once the exchange or your bank closes doors, your money is still in their database and you will have a hard time getting your money back.

[dihari]

An exchange sells BTC to people. People pay full amount to an exchange.

Exchanges doesn't sell btc, it's a bridge between people who want to buy and people want to sell. If they agreed with the price offered, they can execute the order in the exchange. And the exchange getting profit from taker/maker fee.

People cannot buy BTC without an exchange.

False. You can buy or sell bitcoin without exchange.
Example: Just find someone in this forum who want to exchange his btc for your PayPal.

[btc-room101]

An exchange sells BTC to people. People pay full amount to an exchange. People cannot buy BTC without an exchange.

But an exchange is not the creator of BTC.

Does the exchange take BTC free of charge from the blockchain?

For insntace, in an exchange, the fee is 6.99%. When I buy BTC from the exchange using a card, I pay 106.99%.
6.99% is the profit of the exchange.

So who keep the 100%?

1.) The #1 way exchanges get bitcoins is they force their customers to hold the private key on the exchange, thus the ownership of YOUR btc is in their hands

2.) The #2 way is that they charge huge fees to get in&out of BTC

3.) The #3 way is that they set the mining fee's high to get fast transaction settlements and pass all fee's onto the customer, of course most miners in china, are the owners of the exchanges so this is a 'keep the money' in the family racket

If your a large miner, it pays to own your own exchange, so that you can easily go to cash with no middle-man, also all the fee's are passed to customer

eToro on their website says 90% of all users/traders lose 100% of their deposits in one months, not a bad racket, 'exhanges/trading houses' are a legal way to print fiat.

[btc-room101]

An exchange sells BTC to people. People pay full amount to an exchange.

Exchanges doesn't sell btc, it's a bridge between people who want to buy and people want to sell. If they agreed with the price offered, they can execute the order in the exchange. And the exchange getting profit from taker/maker fee.

People cannot buy BTC without an exchange.

False. You can buy or sell bitcoin without exchange.
Example: Just find someone in this forum who want to exchange his btc for your PayPal.

or go to localbitcoins.com, and talk to the seller directly and have him sell you and bypass the localbitcoin.com scam where they have you use their address, most of the sellers post their website on localbitcoins.com, so its easy to bypass the middle-man

lots of ways to buy

you can have the seller meet you in a public place and pay cash, or transfer from your bank, nobody has to use paypal ( musk )

'Exchanges' are trading fronts to rip off newbs,  they take your cash, and then show you a balance in BTC that they hold for you, how do you even know if that is backed by REAL BTC?? You don't, its not your address, its there's, if you don't hold the private-key, you don't own it, if you demand, and provide an address where you hold the 'priv-key', and they send you your money in BTC, expect to pay $150 or more in fees, another way they rob you

Almost all the 'exchanges' are really just trading pits, so newbs can buy/sell any crypto they wish, most operate like 'nicehash', where they never let you use your own address where you hold the private-key

Even the IRS-COINBASE works on the same premise, they hold the KEY, they OWN your bitcoin


"How do exchange makes money"? by ripping people off