Binance Fees Explained

If you use Binance, you might wonder about how differently they handle fees, and their BNB coin, and what you can do about it..

What’s Going On

At time of writing, Binance is the top fee-based CryptoCurrency exchange on the market.  By a huge margin.  They offer many pairs, lots of volume, have a decent interface and the API works most of the time.  It’s one of the top exchanges used by Gunbotters everywhere due to the profits gained.  Professor Bitlion wrote a series on “The Best Exchange of Them All” (GBU premium content) where he helps people choose which exchange would best work for them.

Binance introduced something revolutionary when they launched – they have their own cryptocurrency token, called BNB, that can be used for paying Trading Fees.  A Trading Fee is what all centralized exchanges charge for making or taking trades.  Some exchanges have a flat fee for all trades; others charge a different fee for makers and takers (the maker is the one who places a new order on the order book and the taker is the one who fills an existing order on the order book), and still others charge a sliding scale of fees based on volume, such as how much volume in the last 30 days.

In most if not all of those exchanges charging fees, they usually take their fee from one of the coins in the transaction.  For example, if buying LTC (LiteCoin) with BTC (Bitcoin) on Bittrex, then Bittrex takes 0.25% out of the trade from BTC.

Binance still supports that style of trading fees – the fee can be taken out of the purchased coin (not the funding coin).  But if the trader has BNB coin in their account, and has enabled the function “Use BNB for Fees”, then the fee is paid from the BNB coin instead of either the funding or the purchased coin.  This is what is new and different from the other exchanges.

The Good Points

As a Gunbotter or Day Trader or even a casual hobbyist, there are several positive traits of using a 3rd currency such as BNB to handle fees.  In fact, if someone is Gunbotting, it’s essential they understand what BNB can do for them, so they avoid losing out on the benefits.

Trading Fee Discounts

First, Binance currently offers a major discount on fees if you pay for fees with BNB.  For the first year, fees paid with BNB enjoy a 50% discount.  Binance fees are already some of the lowest around, with 0.1% being what they charge.  Compare this to Bittrex’ 0.25% and you have my attention.

The fee discount is on a schedule:


This notice was published around July 2017 so we still have some time to enjoy the 50% discount.  Then it will drop to 25% discount, and so on.

This means that instead of paying 0.25% + 0.25% at Bittrex for a normal trade – buying something and then selling it later – for a total of 0.5%, you can pay just 0.1% total (0.05% + 0.05%) for the same trade.

An 80% savings in fees is incredible, especially for Gunbotters who generate a flurry of trades 24×7.

Keeping Coins Whole

The second major reason for using BNB, especially when you use Gunbot and make a lot of trades, is that the coin you buy and the coin you buy with are both kept whole.  Since Binance requires most coins to be transacted in whole amounts, or on some coins only allowing one or two decimals, this becomes increasingly important.

Here’s an example of a typical trade without BNB:

  1. You configure Gunbot to run on BTC-EOS pair with a typical minimum TRADING_LIMIT of 0.001.
  2. Gunbot buys 0.001 BTC worth of EOS.  It has to buy them in whole number increments, so it buys 2.00 EOS
  3. The fee (0.1%) is calculated from the value of the trade and then the fee is paid with the bought coin (EOS).  So, EOS is re-evaluated in BTC terms and 0.1% of the value is deducted from the resulting EOS you receive.
  4. You are now the proud holder of 1.998 EOS
  5. Imagine the value of EOS went up.  CHA-CHING!
  6. Gunbot sees the price has gone up according to the strategy you run.  It goes to sell the EOS, and sees that it has 1.998 EOS to sell.  However, Binance requires whole numbers, so it rounds down to 1.0 EOS
  7. It tries to place a sell order for 1.0 EOS, but that is less than 0.001 BTC worth.  Binance kicks back the order, saying “your order needs to be at least THIS big to tradeGo home, kid.
  8. You are now stuck with this EOS bag until the coin doubles or you manually fix it by buying more EOS at the current price.

Now, here’s the same trade, but with the trader owning BNB:

  1. You configure Gunbot to run on BTC-EOS pair with a typical minimum TRADING_LIMIT of 0.001.
  2. Gunbot buys 0.001 BTC worth of EOS.  It has to buy them in whole number increments, so it buys 2.00 EOS
  3. The fee (0.1%) is calculated from the value of the trade and then a discount is applied (50%), so the fee ends up being 0.05%.  The fee is paid with the BNB coin.
  4. You are now the proud holder of 2.0 EOS
  5. Imagine the value of EOS went up.  CHA-CHING!
  6. Gunbot sees the price has gone up according to the strategy you run.  It goes to sell the EOS, and sees that it has 2.0 EOS to sell.  It knows Binance requires whole numbers, so this is fine.
  7. It tries to place a sell order for 2.0 EOS, and the order goes through because it meets the minimum order size.
  8. You have now profited.  Continue the cycle again, because that was fun!
Result: Using BNB for fees keeps your purchases whole so that you can more easily sell them.

It also helps tremendously with profit calculations since the fee is actually a separate transaction.

The Catch

We’ve gone over a couple major benefits to using BNB for fees. However, there is a catch to trading at Binance that should be pointed out.

As mentioned briefly in the example above, Binance disallows fractional trading on most coins, and on the other coins, it allows it but only to 1 or 2 or 3 decimals, depending on how expensive the coin is.  Said another way – at Bittrex, I can sell 1.99988882 EOS without a problem.  At Binance, I cannot sell 1.99988882 EOS – I have to sell 1 or 2 or some whole number.

This means that for many trades, you collect “dust” – which is a small amount of a coin left over or hanging around in your balance – that you cannot sell!

You don’t just collect dust from trades made without BNB token to pay the fees.

Dust from Binance referrals

Dust can also collect if you participate in Binance’s referral program.

Binance rewards affiliates by giving participants a percentage of the fees their referral pays.  This results in tiny micro-deposits of all sorts of coins, and the more you refer, and the more active they are, the more deposits you receive.

If someone you referred bought LTC with BTC, then they will pay 0.1% fee in LTC, and you will receive a percentage of that fee.  A tiny amount of LTC will just magically show up in your account.  And you cannot sell a tiny amount of LTC for BTC.

How to handle Binance dust

If you can’t sell a tiny amount of LTC for BTC, how do you handle it?  Is Binance tricking us all?

Well, this is the other use of BNB coin.   There are several coins on the BNB pair list.  You can’t sell a tiny amount of LTC for BTC, but you can sell a tiny amount of LTC for BNB.

Not every coin at Binance has a BNB pair.  For example, at time of writing, EOS doesn’t have a BNB pair.  So if you find yourself with a fractional amount of EOS, you are stuck with it until you collect more dust to fill in the gap to the next whole number.

But there are plenty of pairs that do provide a BNB option… and this is where you can periodically sell off your dust, or more likely for Gunbotters – purchase the dust you need to top off the coin to a whole number.

So, if you find yourself botting BTC-IOTA and then all of a sudden you have 0.8 IOTA you can’t get rid of, you can go sell it on the BNB-IOTA pair (IOTA/BNB in Binance terms).

The Bad Points

You probably thought “The Catch” was all there was.  Nope – there’s another catch.  And that’s if you use CoinTracking.info or other sites that pull trade history via API.

GBU gunbot university cointracking referral link discount

Normally, when CoinTracking pulls in trades from an exchange, it is able to discern the fee and includes this on the actual transaction.  For example, if you bought LTC with BTC, then this transaction would be one transaction in CoinTracking showing the purchase price and amount, the funding price and the amount, and then a fee and specify which coin was used for the fee.

However, with Binance, these fees are not associated correctly.  At time of writing, CoinTracking‘s recommendation is to create an additional transaction as [OUT] Lost for the fee.  That can result in a LOT of transactions for active Gunbotters.  Many Gunbotters have hundreds of transactions a day, so a manual correction is not feasible.

One would expect a more automated tool to address this in the future, either CoinTracking calculating it correctly, or a 3rd party tool to help run a report, find the fees and then insert the appropriate information into CoinTracking. I don’t know if a second transaction is feasible, but I can see a group-by-day or a group-by-week or a group-by-month offset transaction being entered to keep the BNB balance correct as well as appropriately handling fees for tax reporting purposes.

Summary:

  1. Using BNB can result in non-trivial discount on trading fees.
  2. Binance disallows fractional trading on many coins, which can clog up Gunbot.
  3. Paying fees with BNB can keep coins whole so you can easily sell what you bought and preserve profits.
  4. BNB coin pairs help A) sell off dust to reclaim stuck profit or B) purchase dust to make a coin’s balance whole enough to sell.
  5. Binance’s referral program creates dust, and must be handled manually.
  6. Tracking BNB Fees in services like CoinTracking.info can be difficult or inaccurate.