What are makers and takers?

What are makers and takers?
Generally speaking, the more users an exchange has, the greater
'market depth' it is able to provide. Market depth refers to the
size of the exchange's order books. People who place buy and sell
orders on exchanges are known as market makers. The more orders
there are on the book, the easier it is for people to buy and
sell large amounts of bitcoin at closer to the global market
rate. In markets, takers are those who reduce liquidity by taking
orders that are already on the books. When you place a market
order, you're a taker. You can also be a taker when you place a
limit order if your order happens to match with another person's
order that's already on the books.

How do centralized bitcoin exchanges make money?
In a word: fees. These may include some or all of the following:

Withdrawal fees

Most exchanges charge a fee to withdraw bitcoin, other
cryptocurrencies, and local currencies. In most cases, the fee is
on a per withdrawal basis (not a percentage of the withdrawal
amount). The withdrawal fees charged by exchanges tend to change
frequently, often without notice.

Trading fees

These are typically calculated as a percentage of the trade value
and often depend on whether you're the maker or the taker (see
above for an explanation of makers and takers). In most cases,
makers pay lower fees than takers. The rationale for the
discrepancy is that makers provide liquidity (and should,
therefore, receive a discount), while takers remove liquidity
(and should, therefore, be charged extra).

Interest/Borrowing/Liquidation Fees

Some exchanges offer margin trading. This is where you borrow to
increase your position, creating what's known as leverage.
Exchanges that offer margin trading typically charge additional
fees based on the amount borrowed and an interest rate determined
by the total supply of funds available to all traders. You'll
also likely be charged an additional fee if your position is
liquidated.

Why do I have to verify my ID to use a centralized bitcoin
exchange?
Taking custody of customers' bitcoin and other cryptocurrencies,
as centralized exchanges must do, has legal implications.
Specifically, such exchanges are subject to the money transmitter
laws in the jurisdiction in which they are legally registered.

For this reason, most centralized cryptocurrency exchanges
require you to complete a registration process in which you must
verify your identity before you can use the platform. Regulators
impose this requirement on exchanges ostensibly to prevent money
laundering, terror financing, and tax evasion. Regulators also
typically require exchanges to report customer information
(including trading history) upon request.

In many cases, you'll be allowed to begin using the exchange by
verifying your email only. It's important to note that this 'lite
verification' typically comes with considerable restrictions
including limited purchase amounts, limited withdrawals, and in
some cases, no withdrawals at all. Before you fund a
cryptocurrency exchange with bitcoin or any other cryptocurrency,
be sure to check that you'll be allowed to withdraw.

The next level of verification typically entails uploading
nationally-issued identification like a passport or driver's
license. In some cases you'll be asked to upload a photo of
yourself holding your ID next to a piece of paper on which you've
written, for example, the current date and a specific message as
requested by the exchange.

Note that many exchanges exclude certain nationalities from using
the exchange altogether.

How does peer-to-peer bitcoin exchange work?
A number of match-making platforms such as Peach Bitcoin have
arisen to (1) help buyers and sellers of bitcoin find each other,
and (2) facilitate trades (typically with the use of escrow)
without actually taking custody of the traders' bitcoin. These
are known as peer-to-peer bitcoin exchange platforms.

Peer-to-peer bitcoin exchange platforms can be an effective way
to buy and sell bitcoin, but since you must individually
negotiate trades, they carry a certain level of inconvenience.
For buyers, it can be difficult to quickly obtain the exact
amount of bitcoin they'd like to purchase, and to get it at
competitive market rates. Sellers, meanwhile, may face legal
implications depending on their jurisdiction and the volume of
bitcoin involved. These factors combine to make most peer-to-peer
bitcoin exchange platforms considerably less liquid than most
centralized (custodial) cryptocurrency exchanges.

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