← Crypto · lesson 6 of 12
By the end of this one you'll know what an exchange is, every step that happens when money becomes crypto, and every place a fee comes out along the way.
An exchange is a business that runs a marketplace where people buying crypto meet people selling it, same as the sale barn where ranchers bring cattle and buyers bring cash. Step one, the buyer in our example moves dollars from their bank into an exchange account, that's driving into the lot. Step two, they place an order, and the exchange matches them with a seller the way the auctioneer pairs a bidder with a rancher, and the two never meet. Step three, the exchange takes its cut for running the barn, called a trading fee, and there's also a spread, which is the small gap between the price sellers get and the price buyers pay. Step four, the crypto shows up in their account on that exchange, but hear this part clearly, it's sitting in the exchange's barn, under the exchange's roof, with an IOU to the buyer. The sale barn doesn't work for free and neither does an exchange, fees are how they keep the lights on. None of that is a scandal, it's just the machinery, and you deserve to see every gear.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
In this example, $100 goes in by debit card and the card fee is 2%, so $2 comes off, leaving $98.
The trading fee is 0.
5% of that $98, about 49 cents, and the spread quietly costs about 50 cents more.
So roughly $97 of actual crypto lands in the account, and turning it back into dollars later would run through fees all over again.
It's Friday, the bills cleared, and for once there's an extra $100 sitting in checking. You've been curious about crypto for months, and tonight the curiosity is winning. The app is downloaded and staring at you.
Pick your move. Then peek at the other roads if you're curious.
An exchange is a sale barn, and the barn takes its cut at every gate, coming in and going out.