Carefully! Lots of text.

Makers and takers form the basis of the market. Makers create buy or sell orders that are executed over time (for example, “sell BTC when the price reaches $15,000”). This creates liquidity, allowing other users to instantly buy or sell BTC when conditions are met. Users who instantly buy or sell assets are called takers. In other words, takers execute orders created by makers.


Introduction

Any exchange (be it Forex, stocks or cryptocurrency) serves as a link between sellers and buyers. Without them, traders would have to independently search social networks for buyers or sellers to exchange Bitcoin for Ethereum.

In this article we will look at the concepts of makers and takers. Each market participant falls into either one or the other category - at a certain stage, all traders manage to act as both. Many trading platforms rely on makers and takers, and their presence (or lack thereof) distinguishes strong exchanges from weak ones.


Let's talk about liquidity

Before we dive into talking about makers and takers, let's remember liquidity. Whether an asset is classified as liquid or illiquid indicates how easy it is to sell.

An ounce of gold is a very liquid asset because it can be easily and quickly exchanged for money. But the ten-meter statue of the Binance CEO riding a bull is, unfortunately, an extremely illiquid asset. Although it could brighten up someone's garden, in reality few would be interested in purchasing it.

A related (but slightly different) concept is market liquidity. A liquid market is one in which assets can be easily bought and sold at a fair price. In such a market there is a high demand for the purchase of assets and many offers for sale.

At a high level of trading activity, the interests of buyers and sellers coincide somewhere in the middle: the cheapest sell order (ask price) will be equal to the most expensive buy order (bid price). As a result, the difference between the highest supply and the lowest demand will be small (narrow). This difference is called the bid-ask spread.

An illiquid market, in turn, has none of these properties. This is where there may be problems selling the asset at a fair price because there won't be enough demand for it. As a result, illiquid markets often have large bid-ask spreads.

We remembered what liquidity is, and now we can move on to the topic of makers and takers.


Market makers and market takers

As mentioned earlier, traders on an exchange act as either makers or takers.


Makers

Typically, the market value of an asset on an exchange is calculated using an order book, which contains all offers to buy and sell. For example, a trader sends the following request: buy 800 BTC at a price of $4,000. This request is added to the order book and executed when the specified price is reached, i.e. $4,000.

A maker order (Post Only), as in the example above, must be added to the order book, thereby announcing your intentions in advance. In this case, you act as a maker, creating demand in the market. An exchange can be thought of as a grocery store that charges a fee to stock its shelves, in the same way an exchange charges a fee for placing orders.

Typically, the role of market makers is played by large traders and organizations (for example, those specializing in high-frequency trading). Small traders can also become makers by placing certain types of orders that are executed over time.

Remember that using a limit order does not guarantee that the order will become a maker order. If you want to ensure that your order reaches the order book before it is executed, select "Post only" when placing (currently only available in browser and desktop versions).


Takers

To continue the analogy with a store, goods are displayed on shelves for someone to buy. This someone is the taker. However, the goods here are not canned goods, but the liquidity provided.

It turns out that when you place an offer in the order book, you increase the liquidity of the exchange, thereby making it easier for other users to buy or sell. The taker, in turn, reduces liquidity slightly by placing a market order - a request to buy or sell at the current market price. In this case, existing orders in the order book are executed immediately.

You can be a taker when placing a market order on Binance or another cryptocurrency trading exchange. You can also act as a taker using limit orders: when executing other people’s orders, the trader always acts as a taker.


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Maker and taker commissions

Many exchanges make money from commissions on trading transactions between users. Each time an order is created and executed, the trader pays a small amount in the form of a commission. Its size differs between exchanges and can also vary depending on the size of the transaction and the role in it.

Typically, makers receive a rebate (return of part of the commission) for providing liquidity. This is extremely important for the development of the exchange - high liquidity attracts traders and motivates them to trade. An exchange with high liquidity will always be more attractive than an exchange with low liquidity, since transactions here are easier to execute. Typically, takers pay higher fees than makers because they do not provide liquidity.

As mentioned, the structure of such commissions varies by platform. For example, the difference in commissions between Binance makers and takers can be seen on the Commission Rate page.


Summary

Makers create orders and wait for them to be filled, and takers execute them. The key here is that market makers are liquidity providers.

On exchanges that use a maker-taker model, makers maintain the platform's attractiveness as a trading platform. Exchanges reward makers with reduced fees for providing liquidity. Takers, on the other hand, use this liquidity to easily and quickly sell and buy assets, for which they pay higher commissions.