The difference between the network fee and what you are charged on a CEX is a profit for the exchange. However, just because you are charged (for example) 0.001 BTC and the network fee is 0.0005 BTC, it does not mean that the CEX profited 0.0005BTC. CEX's also have to move inputs to hot wallets, cold wallets, etc which are additional costs that come after customer deposits and withdrawals. They pass on this cost to customers with the excessive fee.

Overall, they do profit from the withdrawal fees but not as much as you would assume. If you are using a CEX as a wallet and not a means of trading only, then you will waste a serious amount of money. You should definitely use a wallet for sending/receiving day to day, and only a CEX if there is no other option or means of exchange (dex, p2p, etc are not only fairer with fees but better for your privacy too).

Binance approve your withdrawal request and they proceed it for you together with other users in a batch transaction.

It is an on-chain transaction so Binance have to pay transaction fee to Bitcoin miners. But they do a batch transaction that has many outputs to many users for their withdrawals so Binance save on chain transaction fee with a batch transaction. They benefit from it because they charge all user same high withdrawal fee.

I can say, both Bitcoin miners and Binance get benefit from it. Miners enjoy transaction fee and Binance enjoy a positive balance of what they get by charging users and what they pay to Bitcoin miners.

Your question is who benefits from the transaction fee or rather withdrawal charges of bitcoin done from the exchanges to your wallet i would say both the exchange and miners benefit. Firstly exchanges batches transactions and then send them all out at once (an example is how your Campaign manager sends you your weekly payment combine with others), you know that exchanges have fixed withdrawal charges which most of the Time is higher than the regular transaction fee. So they just take this charges and broadcast your transaction with others and pay a certain amount of fee for the on chain transaction. This fee they pay goes to the miner that mines the block which the transaction they broadcasted belongs to. This transaction fee as said is not that high compared to all the charges they do for all those withdrawals by it users so they also benefit from those charges.

For binance they have a static fee of 0.0005 btc which if you calculate is higher than even what we have as transaction fee now. Also if you have a guess that maybe what if the transaction fee on the mempool gets bigger than there charges? I would say it is not that much of a problem because most of the top exchanges liaise with mining pools to include their transactions into their blocks and they paid them. In fact Binance has its own mining pool which if I am not mistaken is one of the top 6 largest mining pools which makes there’s easier

As far as I know, the transaction fee goes and is paid to the miners who add or process, validate your transaction to the blockchain, and confirm it. So yeah, the miners are the ones benefiting from the transaction fees regardless of the specific source or destination of the bitcoins. The exchange may only charge a withdrawal fee to cover its own costs.

Yes, it's the miners who are going to profit from it directly.


CEX platform will still pay the miners to find the block for your withdrawal, and then it will be pass to you, not sure how much the CEX is making money, but there could be percentage. And that's why you don't have total control of the fees because they are the one setting it so that they can make a profit. And obviously, that's why in this kind of situation that the fees are very high, CEX could be putting like +10% or more on fees on you.

No matter what type of wallet, every transaction involving the blockchain, miners will receive a share of the benefits according to their portion (block reward) and this must be fulfilled or the transaction will fail. As for who top ranked, exchanges can adjust the "reward" level at their discretion. The answer is, it depends on which exchange you are talking about.

Miners win in both scenarios, no matter what the Cex does or charges the miners will still get paid the same fee in both examples, that is when we look at it in sat/b, so they will charge the same for the same space in the block, they don't care who is paying or what that tx is about.

Now, about the CEX there can be two scenarios-
- the CEX charges you extra for each withdrawal or already has a standard fee that covers it pretty well, so they make a bit of money
- the basic withdrawal fee the CEX charges is smaller than the fee they pay, even if they batch transactions so they will pay the remaining out of their own pocket in order to not piss users

For example, Binance charges 0.00038, around $13 , enough for a 1input one output tx, but since they batch them by the dozen,
https://mempool.space/tx/e9bf06b9752e541b9b586506961513b48c461b41ad21afe912cd944b627cfda3
they can afford to pay 411 sat/vB  for example, and still make a profit.

Well, they all do but at the same time they don't to this extent, because the moment you have garbage like this in your fees, it stops being shady and greedy and becomes a complete middle finger to every BTC user:


I dare anyone to come up with a plausible explanation for this one

More profit for us you suckers thank you for using our scummy centralized exchange.
Next victim step right up and we'll screw you in fees too take the profits and keep them for ourselves.

OK @stompix thats perfectly plausible explanation, what prize do I win?

-Dave