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How does this happen? Why does everyone have their coins in a single place instead of their wallet? Aren't transfers in and out of wallets basically free? I d

How does this happen? Why does everyone have their coins in a single place instead of their wallet? Aren't transfers in and out of wallets basically free? I dont do cryptocurrency, so I'm not familiar with the buying and selling, but why aren't the coins you buy put directly into your wallet?

jbverschoor 6y ago
Because exchanges are normal applications. Otherwise trading would be slow and expensive. Also, not everybody is able to keep their private key safe
rspeele 6y ago
> Aren't transfers in and out of wallets basically free? For Bitcoin, not even close. Median fee is $10 now. Several days ago it was as high as $25. The mean is much higher, roughly double the median at any given time.
WA9ACE 6y ago
As much as cryptocurrency for me personally is to have control over its access via a wallet, many people do not want the responsibility to permanently losing their cryptocurrency due to any number of things that could cause a loss of access. In this case exchanges appear to have become the de facto custodian for many people's cryptocurrency holdings. We might could compare it to having cash in mattress vs an uninsured institution that could be hacked or dismantled by the state at will.
- klmadfejno 6y ago
  Less so in a mattress, moreso in a safe, sitting in the public park, locked with a long string you probably can't just remember in your head.
throwaway4good 6y ago
Because making money doing fraud when running an exchange is easy, and making money without doing fraud is hard. You accept cash from credit cards with risk of clawback etc., transaction costs for money major cryptos (bitcoin, ethereum) are through the roof, you need lots of users to make a liquid market plus cost of infrastructure and development. I don't see how an exchange is making money unless it charges ++% pr. transaction or does something that invites fraud and sudden collapse like keeping all crypto in a single wallet.
- rspeele 6y ago
  > I don't see how an exchange is making money unless it charges ++% pr. transaction As far as I know, they all do. An exchange's users foot the bill (plus a premium) for on-chain transaction fees if they want to withdraw their coins to a private wallet. But not only that, the real money is in fees for trading coins on the exchange. You slap a little bitty 0.25% fee on every trade, and all of a sudden the jillions of day-traders trying to make money swapping BTC for DOGE or whatever other altcoin-of-the-day and back are a firehose of cash. Those trades are just taking place in your database, not on-chain, so your costs for servicing them are tiny. Running an exchange should be like running a casino: a license to print money. Of course, stealing all the money on the table at once is tempting too...
- alienalp 6y ago
  Most exchange don't accept credit card. And even if they accept they charge additional fees. Almost all exchanges charge users for transaction costs and most of the time more than the real cost itself. Most of the new exchanges runs their own bots to put liquidity.
rchaud 6y ago
The people moving money into crypto are likely just trying to hedge against the collapse of the lira vs other currencies. Assuming their experience is primarily within a regulated banking system, they would not know about the numerous security precautions you need to take to 'be your own bank'.
Hjfrf 6y ago
With an exchange, you can have a centralised database of how much is in each person's account. So for internal transfers, you can just update the good old relational database and dodge the fees. For transfers between exchanges, they can settle the net balance daily (or have some thresholds etc) to minimise any actual on-ledger transfers. Of course all this makes the decentralized aspect of the currency pointless, but most people don't actually understand or care.
purple_ferret 6y ago
Most people are technologically lazy (use the same password for everything etc) and the work that has to go into managing and securing your own wallets is not worth the effort. Not the mention the fees are prohibitive for moving small to medium amounts.

jbverschoor 6y ago

Because exchanges are normal applications. Otherwise trading would be slow and expensive. Also, not everybody is able to keep their private key safe

rspeele 6y ago

> Aren't transfers in and out of wallets basically free? For Bitcoin, not even close. Median fee is $10 now. Several days ago it was as high as $25. The mean is much higher, roughly double the median at any given time.

WA9ACE 6y ago

As much as cryptocurrency for me personally is to have control over its access via a wallet, many people do not want the responsibility to permanently losing their cryptocurrency due to any number of things that could cause a loss of access. In this case exchanges appear to have become the de facto custodian for many people's cryptocurrency holdings. We might could compare it to having cash in mattress vs an uninsured institution that could be hacked or dismantled by the state at will.

klmadfejno 6y ago
Less so in a mattress, moreso in a safe, sitting in the public park, locked with a long string you probably can't just remember in your head.

throwaway4good 6y ago

Because making money doing fraud when running an exchange is easy, and making money without doing fraud is hard. You accept cash from credit cards with risk of clawback etc., transaction costs for money major cryptos (bitcoin, ethereum) are through the roof, you need lots of users to make a liquid market plus cost of infrastructure and development. I don't see how an exchange is making money unless it charges ++% pr. transaction or does something that invites fraud and sudden collapse like keeping all crypto in a single wallet.

rspeele 6y ago
> I don't see how an exchange is making money unless it charges ++% pr. transaction As far as I know, they all do. An exchange's users foot the bill (plus a premium) for on-chain transaction fees if they want to withdraw their coins to a private wallet. But not only that, the real money is in fees for trading coins on the exchange. You slap a little bitty 0.25% fee on every trade, and all of a sudden the jillions of day-traders trying to make money swapping BTC for DOGE or whatever other altcoin-of-the-day and back are a firehose of cash. Those trades are just taking place in your database, not on-chain, so your costs for servicing them are tiny. Running an exchange should be like running a casino: a license to print money. Of course, stealing all the money on the table at once is tempting too...
alienalp 6y ago
Most exchange don't accept credit card. And even if they accept they charge additional fees. Almost all exchanges charge users for transaction costs and most of the time more than the real cost itself. Most of the new exchanges runs their own bots to put liquidity.

rchaud 6y ago

The people moving money into crypto are likely just trying to hedge against the collapse of the lira vs other currencies. Assuming their experience is primarily within a regulated banking system, they would not know about the numerous security precautions you need to take to 'be your own bank'.

Hjfrf 6y ago

With an exchange, you can have a centralised database of how much is in each person's account. So for internal transfers, you can just update the good old relational database and dodge the fees. For transfers between exchanges, they can settle the net balance daily (or have some thresholds etc) to minimise any actual on-ledger transfers. Of course all this makes the decentralized aspect of the currency pointless, but most people don't actually understand or care.

purple_ferret 6y ago

Most people are technologically lazy (use the same password for everything etc) and the work that has to go into managing and securing your own wallets is not worth the effort. Not the mention the fees are prohibitive for moving small to medium amounts.