Why the commission charged by exchanges for buying or selling bitcoin is cheaper

[RLopezM]

Why the commission charged by exchanges for buying or selling bitcoin is cheaper than sending bitcoins.

What goes under the hood when you buy bitcoins at an excange, ¿interacts with the blockchain?

Thanks

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[Blawpaw]

I guess that you are mixed up with what is a decentralized exchange such as Sushiswap where the fees are in fact related to the transaction fees with centralized exchanges such as Binance where you need to deposit your coins to transact.

Commissions charged by exchanges have nothing to do with the transaction fees. When you buy from an exchange, you are buying from another user. What happens is that the exchange acts as a third party that joins sellers and buyers together to trade. In exchange for the service provided, they charge fees, and those are the ones you pay when you buy or sell your coins on an exchange. Different exchanges, charge different fees.

However, if you use decentralized exchanges, you will pay higher fees as the fees you are paying are in fact related to the transaction fee as you are transacting directly from your wallet and not from a centralized exchange.

[BitMaxz]

So I guess this is just between the Bitcoin trading fee and withdrawal fee.

If you trading on Binance as a sample you could get 25% off for a trading fee their fee structure can be found here https://www.binance.com/en/fee/trading and the trading also depends in your VIP level.

The withdrawal fee is different most of the exchanges have a high transaction fee and you can not able to edit or change it because it was a fixed fee.
Exchanges mostly had issues recently due to low transaction fees they have lots of stuck transactions that is why they decided to increase the transaction fee to solve the issue about stuck transactions.

[Husires]

It's like putting your money in the bank, when you give the platform more money you give them control, the platforms not only earn from fees but there are a lot of ethical and moral ways in which they can earn.

wallet management requires a lot of money, withdrawals do not require much only need verification that you are withdrawing from your balance (avoid double spending) and network fees.
As for the purchases within the platform, it is a database management that does not require much.

[Bitcoin_Arena]

Why the commission charged by exchanges for buying or selling bitcoin is cheaper than sending bitcoins.

What goes under the hood when you buy bitcoins at an excange, ¿interacts with the blockchain?

Thanks

You must be mistaken.

1. Commissions are charged in percentage form. So if you buy bitcoins worth $100 on an exchange that charges 0.1%, you are going to pay only $0.1 in frees. Now try buying Bitcoins worth 10,000 using the same exchange, you are going to pay $100 in fees.

Bitcoin transaction fees are at it's lowest.
Yesterday I spent only $0.07 in a Bitcoin transaction



2. Buying Bitcoin from a centralized exchange means you are performing an off chain transaction that doesn't need Bitcoin transaction fees.

3. When you try to withdraw from an exchange (off chain) to a bitcoin address (on chain). Exchanges tend to charge too much fees. For example right now, an exchange will charge you 0.0005 BTC to withdraw Bitcoin yet the actual fee for a quick confirmation right now is way too low depending on your transaction size.

[bitmover]

Why the commission charged by exchanges for buying or selling bitcoin is cheaper than sending bitcoins.

I think you are probably talking about Maker and Taker fees.
They are different in a lot of exchanges.

For example. in binance you can see a lot of different fees for taker and maker.
https://www.binance.com/en/fee/schedule

If you are a Maker, you are setting the price and waiting for your order to be filled. If you just click in an order, you are a taker. Usually it is cheaper to be a maker, but you have to wait for your order to be filled.

What goes under the hood when you buy bitcoins at an excange, ¿interacts with the blockchain?

Exchange just pays mining fees and transfer from their wallet to your own wallet. As they have a cost, they also charge a some fixed (usually) value to withdrawal, which is much higher than the mining fees.

[The Sceptical Chymist]

Commissions charged by exchanges have nothing to do with the transaction fees.

That's exactly it, and I'm pretty sure that's what OP is getting confused about.  I wish exchanges charged only what it takes to send coins on whatever blockchain they're on, but that's part of how they make a profit.  Some exchanges have pretty reasonable withdrawal fees, and some are just effing insane--especially for coins like BTC and ETH. 

Right now if you're withdrawing a relatively small amount of bitcoin from an exchange like Kucoin, you have to pay 0.0005BTC or so, which is over $30--and that's not worth it if you want to withdraw $100-200.  Even with $300 worth, you're paying 10%.  And the odd thing is that the network isn't exactly congested, nor are fees that high.

Hope that and the other answers members gave you led you to understand what exchange fees are all about, OP.

[The Cryptovator]

Always keep in mind a simple cryptocurrency rule, if the transaction isn't on-chain then it doesn't require any transaction fee itself. As we know centralized exchange uses an internal algorithm to sell and buying cryptocurrency means transaction isn't happening on the chain. Unless you attempt to withdraw your coins then there is no fee. The fee you are paying during the trading is exchange revenue. It doesn't relate to on-chain transactions hence the trading fee is less than the on-chain transaction fee. Decentralized exchange calculations are different than a centralized exchange. Don't mix both.

[examplens]

I guess that you are mixed up with what is a decentralized exchange such as Sushiswap where the fees are in fact related to the transaction fees with centralized exchanges such as Binance where you need to deposit your coins to transact.

I suppose this is the right answer to the OP doubts.

btw. all trading changes in the centralized exchange are internal. therefore, they do not require an additional withdrawal fee.
If you try to withdraw Bitcoin from Binance for example, and you add a withdrawal address also from Binance (some other account) it will be accepted as an internal transaction and it will be executed without an extra withdrawal fee.

[Bitcoin_Arena]

btw. all trading changes in the centralized exchange are internal. therefore, they do not require an additional withdrawal fee.
If you try to withdraw Bitcoin from Binance for example, and you add a withdrawal address also from Binance (some other account) it will be accepted as an internal transaction and it will be executed without an extra withdrawal fee.

Does this apply to all centralized exchanges like Kucoin, Huobi, Bitfinex or just Binance?

I experienced it with only Binance so far.

[Darker45]

Always keep in mind a simple cryptocurrency rule, if the transaction isn't on-chain then it doesn't require any transaction fee itself.

This might be a misleading general statement. I'm afraid this is not really a cryptocurrency rule. Transactions on layer-2 protocols such as the Lightning Network on Bitcoin or Litecoin or whatever coin are considered off-chain transactions, but they're not completely free. There will still be fees, though very small.

If you try to withdraw Bitcoin from Binance for example, and you add a withdrawal address also from Binance (some other account) it will be accepted as an internal transaction and it will be executed without an extra withdrawal fee.

As an additional note, that's true only if you specifically choose the transfer to be internal and not through blockchain. But users have the option to transfer funds Binance-to-Binance on the blockchain.

Moreover, as others might find it confusing in the act of transferring funds, internal Binance-to-Binance transactions actually charge withdrawal fees. The withdraw amount is actually not the same with the receive amount because of the fees, but whatever fees charged will be returned. It is now up to the sender where to send the returned fees, whether to the sender or to the receiver.