Why Do Some Exchanges Choose Cashback Instead of Direct Fee Reductions?

In recent years, the competition among CEXs and DEXs to attract users has shifted. Instead of simply lowering trading fees directly, many exchanges have started giving back part of the fees to users in the form of cashback or rebates (in cash, stablecoins, or tokens).

At first glance, the financial result for traders may look similar: “I pay less.” But behind it lie two completely different product philosophies — and this is why more and more exchanges are choosing cashback as a strategic tool.

1.Business Perspective: Both Mean “Less Fees,” But The Economics Differ

Keeping the “list price” to preserve revenue structure

The listed fee is the benchmark that positions an exchange in the market. If you cut too deeply, you shrink ARPU (average revenue per user) and make it harder to increase later. With cashback, the public fee schedule remains unchanged, while the discount is applied after the trade and under certain conditions (referrals, VIP tiers, trading volume, time limits…). This allows exchanges to:

• Measure ROI by user group.
• Differentiate incentives: users who contribute more or show stronger loyalty receive more cashback.
• Retain financial flexibility: when costs need to be tightened, cashback rules can be adjusted without altering the overall fee table.

Cashback tied to performance

Many cashback programs are based on actual trading volume, targeted pairs, or liquidity provision (maker orders). This means the exchange “gives back” only for the behaviors it wants to encourage (e.g., boosting volume or order book depth). A flat fee reduction does not create this distinction.

Avoiding the “race to the bottom”

If every exchange lowers fees directly, industry-wide margins shrink. Cashback creates a delayed form of competition: still attractive enough to users, but without openly destroying pricing power. Exchanges can optimize per-customer costs instead of permanently cutting profit margins.

2. User Psychology and Behavior: “Money Received Back” Feels Better Than “Paying a Little Less”

People react more strongly to money coming in (cashback) than to a small reduction in money going out (lower fees). The framing effect makes cashback feel more appealing and more tangible:

• Reward feeling: At the end of the month, seeing the exact cashback amount increases satisfaction and loyalty.
• Gamification: Goals like “reach a higher tier” or “hit a trading volume to unlock higher %” naturally drive engagement.
• Easy communication: “Up to X% cashback” is often more compelling than “Fee reduced by Y basis points.”

The outcome: users become more loyal, concentrate more volume to reach cashback milestones, and stick with the exchange long term — results that direct fee reductions rarely achieve.

3.Optimizing Liquidity and Market Structure: Cashback Incentivizes Makers

With the maker/taker model, many exchanges design rebates specifically for makers (sometimes even offering negative fees). The benefits include:

• Deeper order books and narrower spreads → better execution for the whole ecosystem.
• Price stability on new or lower-volume pairs.
• Attracting professional or semi-professional market makers; even individual traders who place limit orders correctly can benefit from rebates.

Directly reducing fees applies the same to makers and takers, while cashback allows exchanges to steer behavior: those who provide liquidity are rewarded more.

4. Compliance and Risk Management: Cashback Is Easier To “Condition”

New regulatory frameworks (such as EU’s MiCA, UK’s FCA) require crypto promotions to be transparent and include risk disclosures. With cashback, exchanges can:

• Attach clear conditions (target users, region, tier, timeframe).
• Prevent abuse (such as wash trading or self-matching) with specific rules.
• Enable or disable cashback selectively by market without changing the global fee table.

Direct fee reductions are harder to target, while cashback works as a fine-tuned adjustment tool.

5. Accounting and Tax: Clearer Financial Tracking

For users, cashback is often accounted for separately (monthly or quarterly). This helps:

• Trace net costs more accurately: fees paid minus rebates received = actual cost.
• Provide better reporting when exporting CSV data for tax or accounting tools.
• Offer stable value when cashback is paid in stablecoins, unlike rewards paid in volatile tokens.

6. Risks of Cashback (and How Exchanges Handle Them)

• Wash trading: High rebates may encourage artificial volume. Solutions: detect abnormal patterns, set anti-self-trade rules, apply limits per pair/account.
• Financial cost: Cashback must be supported by real revenue. If it is too generous, it risks draining budgets. That’s why most programs link cashback to performance or VIP tiers.
• Marketing communication: In tightly regulated markets, language must be precise, not misleading, and clearly state conditions.
• User experience: If paid in volatile tokens, the perceived value decreases. That is why stablecoin-based payouts are becoming more popular.

7. Practical Benefits for Traders: When Cashback Outperforms Direct Fee Cuts

• Case 1 — High frequency, thin margin trading: Scalpers, grid bots, DCA strategies pay fees many times. Monthly cashback creates a visible return stream, helping offset costs (or even become reinvestment capital).
• Case 2 — Tier climbing/VIP programs: Cashback tied to volume milestones motivates traders to consolidate volume on one platform — lowering base fees while also earning cashback.
• Case 3 — Maker rebates: Traders using limit orders may benefit from exchange-maker rebates plus external cashback → net fees can drop significantly.
• Case 4 — Stable income preference: When cashback is paid in stablecoin/fiat, value is preserved, fitting those who want clear PnL and strict risk management.

8. Example: Why Many Traders Choose Long Cashback

Within the wide range of cashback programs, payout method is the real differentiator. Lóng Cashback follows this model:

• Direct stablecoin payouts on fixed cycles (monthly, sometimes even daily depending on the exchange).
• No staking or exchange tokens required.
• Supports multiple popular CEXs, with flexible rates across programs.
• 24/7 support, including handling disputes with exchanges if issues arise.

For busy traders, receiving cashback in a clear, consistent, and reliable way is just as important as the percentage itself. You know exactly how much you save, and you can reinvest or withdraw without worrying about token volatility.

👉 Check your exchange’s cashback rate and activate via longnghien.network.

9. Conclusion

Smart trading is not only about choosing the right coin — it’s also about optimizing costs. While direct fee reductions make trades cheaper right away, cashback provides flexibility, targeted incentives, and measurable rewards.

For exchanges, cashback protects their fee structure, directs trader behavior, and avoids destructive price wars. For traders, it means consistent, recurring savings that directly improve net profitability.

At this stage of the market, cashback is one of the most effective ways to safeguard returns. And solutions like Lóng Cashback, which pay in stablecoins, make every trade not just smarter — but more cost-efficient.