How exchange determine flat fee

[night_driver]

Hello everyone,

I have a question and i know that you have the answer

I noticed that exchange like Binance for example apply a withdrawal flat fee of 0.0002 BTC (≈ 3-4 USD).
I was wondering how they determine this amount because network fee is not fixed.

For example if tomorrow the network has lot of activities maybe the average of fee will be something like ≈30 USD so transaction with 0.0002 could take days to be completed.
So if this scenario is during for weeks they will update they fee manually ? Maybe they have a periodic review (each quarter ?) of flat fee ?

Thanks for you answers !

[jackg]

Most exchanges that use flat fees like that review it periodically and adjust things. There's a lot of exchanges that use fees that vary depending on what the best fee is at the time (they might also go slightly higher to ensure things get confirmed - I've not had a problem with coinbase for example when they set their fees based off the market).

I think people will complain about both because on one you can expect to pay the same fee for a while and on the other you can spontaneously pay more or less but you're paying what the network demands and not the exchange.

[AmoreJaz]

Most exchanges that use flat fees like that review it periodically and adjust things. There's a lot of exchanges that use fees that vary depending on what the best fee is at the time (they might also go slightly higher to ensure things get confirmed - I've not had a problem with coinbase for example when they set their fees based off the market).

I think people will complain about both because on one you can expect to pay the same fee for a while and on the other you can spontaneously pay more or less but you're paying what the network demands and not the exchange.

i believe it is also the same with casino's withdrawal fees. they also have periodic reviews of their fees. some may be late in updating their fees but for sure they won't reach to the point that they will go bankrupt because they are charging lower fees. most of the time, they are getting the average for certain period of time and work from there. it is now on the exchange or trading platform how and when they will change their fees. just look at casinos, they usually change their btc withdrawal fees depending on the market's price.

[night_driver]

Thanks you guys for your answer. Thats very interesting !

Take care you both !

[dothebeats]

They would most probably check the trend on fee over a period of time e.g. 2 weeks and adjust from there. I notice this when using a local exchange. Their fees change every 2 weeks and they try to keep it as close to the minimum as possible without having to shoulder anything and still get the transaction confirmed within the next block. It's not like they decide these things arbitrarily and just pick a number that they feel like. That $3-$4 already has a huge buffer on it to make sure that all transactions with more bytes can still get some confirmation within the next block.

[Bitcoin_Arena]

The key adjusting fees periodically depending on the market condition. For example, At one point in the recent bull run, Binance was charging 0.0005 BTC for withdrawal when Bitcoin transaction fees surged for weeks... Even when BTC transaction fees dropped, they kept it at 0.0005 BTC until after several months.

i believe it is also the same with casino's withdrawal fees. they also have periodic reviews of their fees.

Some casinos like Bustadice offer dynamic withdrawal fees depending on the mempool conditions. Which all exchanges would adopt such a model.

[SquirrelJulietGarden]

Exchanges include withdrawal fee with other fees: maintenance fee, consolidation fee (from small inputs of users in deposits), security fee and more.

They usually apply a static fee and very rarely update it. In the meantime, usually months without update on withdrawal fee, they earn a lot from users.

In addition, they make batch transaction for withdrawals of many users so they even earn a lot from users' withdrawal fee.

[night_driver]

The key adjusting fees periodically depending on the market condition. For example, At one point in the recent bull run, Binance was charging 0.0005 BTC for withdrawal when Bitcoin transaction fees surged for weeks... Even when BTC transaction fees dropped, they kept it at 0.0005 BTC until after several months.

i believe it is also the same with casino's withdrawal fees. they also have periodic reviews of their fees.

Some casinos like Bustadice offer dynamic withdrawal fees depending on the mempool conditions. Which all exchanges would adopt such a model.

Thanks for your feedback.
Yes its depends about the market activity.

[night_driver]

Exchanges include withdrawal fee with other fees: maintenance fee, consolidation fee (from small inputs of users in deposits), security fee and more.

They usually apply a static fee and very rarely update it. In the meantime, usually months without update on withdrawal fee, they earn a lot from users.

In addition, they make batch transaction for withdrawals of many users so they even earn a lot from users' withdrawal fee.

I didn't thought about batch transactions but ofc with this they can earn a lot.

It's a smart strategy 

[bocyaj]

Now a days,many exchange the huge fees for the trade.I had recently converted various coins to usdt in one exchange,their nearly 9$ of 425$ was goes as the fee.It should be over come from the exchanges,it’s look like a stealing of funds from the users.As compared to 425$,9$ May be nothing.But 9$ is enough for the good food for a week in many developing countries.So the fee should be reconsidered by the exchange to increase the traders.

[hugeblack]

In general, they depend on the worst-case scenario, which is the withdrawal fees in addition to their profits, and therefore, the ratio of 3 dollars to 5 dollars will represent wealth if we assume the following:

  - batching transactions^[1]: By using this method, you reduce fees significantly, however, the user pays high fees.
 - Low Bitcoin fees: Bitcoin fees are often very low.
 - Run Memepool: Some platforms have their own pool.

[1] https://cryptoadventure.com/bitcoin-batching-transactions-what-you-need-to-know/

[Findingnemo]

Hello everyone,

I have a question and i know that you have the answer

I noticed that exchange like Binance for example apply a withdrawal flat fee of 0.0002 BTC (≈ 3-4 USD).
I was wondering how they determine this amount because network fee is not fixed.

For example if tomorrow the network has lot of activities maybe the average of fee will be something like ≈30 USD so transaction with 0.0002 could take days to be completed.
So if this scenario is during for weeks they will update they fee manually ? Maybe they have a periodic review (each quarter ?) of flat fee ?

Thanks for you answers !

Exchanges can definitely afford even if the network is clogged and have to pay high transaction fee than the withdrawal fee we are paying because the transaction is not going to have single input and single output, it will be definitely have multiple outputs so basically they are pooling all the transaction together and pay whatever the fee is required.