Maker and taker are terms commonly used in cryptocurrency trading to describe different types of traders and their roles in the market.
1. Maker: A maker refers to a trader who adds liquidity to the market by placing a limit order that is not immediately matched with an existing order on the order book. In other words, a maker provides liquidity by offering to buy or sell assets at a specific price and waits for another trader to take their order. Makers typically place limit orders rather than market orders. Makers are rewarded with lower trading fees or even incentives on certain exchanges for providing liquidity.
2. Taker: A taker, on the other hand, is a trader who removes liquidity from the market by placing an order that is immediately matched with an existing order on the order book. Takers are essentially taking the existing offers available in the market rather than creating new ones. Takers typically place market orders or immediately fillable limit orders. Takers may incur higher trading fees compared to makers because they are consuming existing liquidity.
The distinction between makers and takers is important because it helps incentivize trading activity and ensures the liquidity and efficiency of the market. By offering lower fees to the makers, exchanges encourage traders to provide liquidity, which helps maintain a healthy trading environment.