If you have not watched the growth of cryptocurrencies very closely, you may not understand the reason behind the high trading fees that are innate to large crypto trading platforms.

The fees for trade at most crypto marketplaces are an incredible 100 times higher than those of other, more traditional trading markets.

These high trading fees are, in part, a result of the mechanics utilized to grow the trading volume of these platforms into what they are today. Trading fees are also imposed by these trading platforms to keep up with the enormous growth of cryptocurrency. They are implemented so that a platform can stay operational when volume reaches levels so high that resources for maintaining and operating become scarce.

Every platform, just like the majority of coins ever issued on any of the blockchains, has undergone what is called an ICO (initial coin offering) and an airdrop/bounty campaign. An idea for a blockchain business is formed, and a whitepaper (explaining the vision, mechanics, futures, and scale-ability of the project) is written. The project is then either backed by it's creator's assets to give the tokens value, or it seeks out investors to back the project with equity.

After the project is backed with some equity, the idea becomes tokenized and a certain number of tokens are minted as a currency on one of the blockchain networks. Even with the first investors equity backing it, each project still has a long way to climb before it has a chance to become a stable currency.

Generally, a certain number of these tokens are allotted to what is called an ICO and another portion for airdrops/bounty campaigns. Being that blockchain is based in a global and decentralized environment, these tools account for a huge amount of growth in each coin, just as they did in the initial days of the large trading platforms that we know today.

In lamen's terms, these ICO's, bounties, and airdrops are a way to, 'get the word out' that a new coin has been tokenized on the blockchain. They offer rewards to anyone willing to share the knowledge of the coins on social media, forums, and websites. This helps to draw investors who then stake (lock in equity) for their coins at a much better rate than if they were to have waited for them to hit exchanges. If an investor chooses to invest in the right coin, the profit can be enormous if that project succeeds.

The whitepaper of each project explains the expected projections for the future of the coin. This gives investors an idea of the expected growth their investment should see over the locked staking period.

Once the ICO is completed, a certain percentage of the unsold currency is 'burnt' (destroyed), increasing the overall value of the remaining tokens. If a coin is successful enough to be listed on a platform after completing it's ICO, it then begins it's airdrop/bounty campaign with the tokens left that are designated for that purpose. This is similar to the ICO campaign with the exception that the coin is already actively being traded in this stage.

The airdrop stage is also purposed to continue drawing more investors to increase the equity held by each token. In the initial days of each of the larger trading platforms, the same mechanics were in place. They are, in fact, still being used.

As these large crypto platforms have grown, they have used the high trading fees as part of their mechanics to run airdrop campaigns (i.e., Binance offers up to 40 percent of trading fees for referrals). The airdrops cause an increase in the overall trading volume on their platforms. High trading volume on a platform is desirable, as it creates more action and movement and of course more ability to create profits for traders especially when using derivatives.

Being that the volatility in cryptomarkets is caused because their value is based primarily on market psychology, increasing the desirability of *any and all* cryptocurrencies, will always increase their overall value.

There is also another reason for high trading fees, of course. In todays markets, cryptocurrency is an enormous and volatile toddler, growing larger at an enormous rate. As the trading volume of a platform increases, so do the associated fees. This is an intentional cap created on the market so that the platform does not get overrun by too much volume, which could prevent it from being able to maintain itself properly.

The good news for active crypto traders is that, in time, these trading fees should reduce as the larger markets become more stable and begin to compete harder with one another for the existent volume.

I just listened to a webinar in which the CEO of Binance (Catherine Coley) and the co-founder and CEO of FTX (Sam Bankman-Fried) were being interviewed. High trading fees was a topic that was touched on during the discussion. Coley, did allude to the possibility of lower trading fees in the projected future.

*-article by Jonathan Caleb Williams*