How to Buy Tezos Without Losing 10% to Fees Before Your XTZ Reaches a Wallet
Coffee prices keep rising; currently, the average cup at a national-chain coffee shop is $5. Buy $50 worth of Tezos on certain platforms and you'll pay $5 or more to fees alone. Before your XTZ even reaches a wallet, 10% or more of your first XTZ purchase can be burned as fees.
First, buyers must understand how to buy tezos tokens and deposit XTZ to a wallet without giving away parts of every order to spreads, withdrawal fees, and network costs. Exchange fee models differ between centralized (CEX) vs decentralized (DEX) vs buying direct-to-wallet options so much that two identical trades in the same currency can cost anywhere from 5%-12% or more depending on the venue and how the trade is executed.
That cost variance starts to matter more when investing in Tezos specifically compared to most other coins because most people will, at some point, want to stake their XTZ from self-custody. Tezos is currently trading for just shy of $0.40. Meanwhile the conversation around xtz price prediction sees mixed sentiment. Buyers don't get excited about upfront pricing already built in. Every percent saved in crypto fees equals more XTZ held long-term. Here we outline how to bypass these stealth costs outright, which buying platforms make the most sense depending on how much funds you're working with, and how to move your XTZ to self-custody without overpaying along the way.
Exchanges: Where Most of the Fees Hide
Exchange fees rightfully get most of the focus when buying Tezos. The spread doesn't get nearly enough consideration. The price "quote" you are given is often inflated to account for the spread. Coinbase's beginner-friendly buy UI for example includes a spread of approximately 0.5% to 2% on top of a clearly labeled "transaction fee" of $0.99 to $2.99 USD if your purchases are less than $200. This totals out to $3 to $5 of total transaction costs on a $100 buy utilizing Coinbase's simple UI.
If that same $100 order is rerouted to Coinbase Advanced Trade (previously known as "Pro") the maker fee reduces to 0.40% while the taker fee reduces to 0.60%, totaling fees around $0.60. Same exchange. Same token. Same dollar amount you're exchanging. 80% less fees.
Kraken is very similar. Instant Buy carries a markup up to 1.5% on buys under $10,000. After that, Kraken Pro sees fees return to their exchange-wide, per-tier and spread-free schedule of 0.25% maker / 0.40% taker. Those who trade through Binance in supported regions will pay base trading fees of just 0.10% but with an additional 25% discount when fees are paid in BNB. That translates into roughly $0.075 on a $100 tezos trade.
The difference between the cheapest source and the most expensive source of our three examples is $4 or more in obscure fee costs for every $100 spent. And the spread, which most users ignore completely, is often by far the largest fee of all.
Buying Tezos: Fiat-to-Crypto Costs
First off, newcomers buying tezos for the first time need to know the full cost profile. We'll focus here on fiat-to-crypto purchases: verify your platform of choice actually has an order-book interface independent of its browser-facing storefront to begin with.
Platform fees aren't all there is to these purchases. Withdrawal fees further compound the complete cost profile. Kraken charges 1 XTZ per withdrawal from the Tezos network. Binance charges 0.5 XTZ. Coinbase charges a dynamic network fee. At today's tezos price this comes out to a few cents, but at marginal buys that accrued cost adds up. Aggregating withdrawals (making many buys then withdrawing as a lump sum) nets you nearly 0% friction on that regard per purchase.
Best Platforms, Sorted by Purchase Size
The size of your trading budget matters. Retail ("simple") trading interfaces are significantly more expensive on a fixed fee basis when purchasing the smallest dollar amounts. A $25 buy using Coinbase's non-advanced user interface will have a $1.49 flat fee applied along with an implicit spread loss, equating to an effective fee of 8%. In this small purchase budget range, either Binance's cheaper order book at 0.10% fees (where supported and available) or using one of the many promotional-period/no-fee exchanges are your best options.
Excluding Robinhood for not allowing withdrawals to externally controlled addresses, in this section we'll assume you have self-custody as a requirement. Binance or Kraken Pro are best, and you can access Binance's order book via the native wallet browser add-on for Google Chrome.
$200 is when Kraken Pro's 0.25% maker fee comes out to $0.50 compared to $3 to $5 charged on retail interfaces. This is also the common starting price for most beginners making their first buy, and where choosing one exchange platform over another can net the widest percentage spread in price differentials.
So where to buy tezos? Unsurprisingly Binance has the lowest fees for supported jurisdictions above a $2,000 trade volume as well as past the $500 mark where maker-taker fees start to compress at even small trade sizes. Maker/taker fees on Binance bottom out at 0.09%/0.10% for all trading pairs with 1 million or higher 30-day trading volume. When trading at minimum maker/taker fees, the flat 0.10% fee still accrues. For example, buying $1,000 worth of XTZ on Binance gives you $1 of fees.
Fees start becoming a smaller percentage of your total cost at the $2,000-$5,000 range. Once Binance's flat rate trade fee tier is reached, exchange spread disappears. Here, slippage (if the order book is small) can become your worst enemy and takes over past that point. Choosing a large market order against the XTZ/USDT or XTZ/USD exchange rate prior to sending your withdrawal and inputting your withdrawal amount can help guarantee that you aren't accidentally withdrawing XTZ tokens for a much lower xtz price than you thought.
Verifying Where New Buyers Lose Money
The largest error I see first-time visitors to Tezos markets make is not choosing the wrong exchange, but using the wrong interface on the right exchange. Coinbase, Kraken, and Gemini all default users to simplified buy interfaces and all three charge significantly more on these simplified views vs their order-book counterparts. Moving from Coinbase to Advanced Trade, Kraken to Pro, or Gemini to ActiveTrader requires no user verification and incurs no cost.
Sending XTZ on the Wrong Network
The second common mistake is withdrawing XTZ onto the incorrect chain. Sending XTZ to an ERC-20 address (when you expected native Tezos-compatible output), for instance, will result in the permanent loss of those XTZ. The address you sent to has not changed. What has changed is the chain that the XTZ resides on. Temple Wallet will only detect Tezos that was received as a deposit from the Tezos network. Until exchanges allow users to select which network to withdraw XTZ to, users will need to ensure they select Tezos when withdrawing.
Aggregators Aren't That Cheap
Swap aggregator sites (like Changelly or ChangeNOW) make the third mistake that most users fall for. These services operate by running a backend swap service themselves for each trading pair they support. Embedded spreads plus service fee always comes out to 2% to 5%. Purchasing crypto this way makes perfect sense if your goal is avoiding having to sign up for exchange accounts for privacy reasons, but if buying with fiat it's almost always your costliest option on a dollar-for-dollar basis.
If you're currently in the process of researching tezos as a cryptocurrency you should buy, or already decided you want to buy tezos and figuring out where: the simple rule of thumb guide is laid out above. Order-book CEX routes (Kraken Pro, Coinbase Advanced Trade, etc.) will be lowest-cost. User interfaces aimed at retail/mass-market users will be in the middle, and "instant swap" services will be your most expensive option.
Subtle Mistake: Market Order Timing
Limit orders only buy/sell at your quoted price. The mistake this section is referring to is using market orders, which can experience larger spreads and slippage during downtimes like early UTC hours, weekends, public holidays, etc. One way to completely sidestep these market conditions is to use limit orders. They only execute at the price you want, allow you to get maker fee discounts, and spare you from having to pay the spread.
DEX vs CEX: Where Tezos Staking Means Which One
If CEX is not available to you, decentralized exchanges on Tezos like Hanji DEX, or soon-to-be liquidity from Etherlink's upcoming DeFi strategy for Tezos natives may be available. This trade-off comes with looking specifically to buy tezos however. For DEX swaps, what you find is different than what you'll encounter on other L1s or what most users would expect even on Tezos. If you are already staking crypto on Tezos and are looking to swap into XTZ, by doing it on-chain you avoid the extra steps of sending XTZ from an exchange to the Tezos network and vice versa since the XTZ is already on-chain. Avoiding these time lags for deposits and withdrawals on an exchange works too.
With negligible gas fees on swaps and on-chain migrations, and transaction fees on Tezos L1 being a fraction of a penny per transaction (at the time of writing), 0.25% swap fees for native DEXs like Hanji DEX can beat out Kraken Pro (USD transaction costs at Kraken are higher when using Pro to buy at this price point).
Trade-off for that (for now) is liquidity. As of this writing, Tezos L1 TVL sits at $33.5M and Etherlink TVL is $37.2M. Swap volumes of this size mean that, given the pool sizes that exist today, swaps over $5,000+ can still experience moderate slippage if the pool doesn't have the depth to support it.
That said, for fiat-to-crypto users who are first-time buyers of Tezos buying XTZ, cryptocurrency exchanges (CEX) continue to be the only realistic on-chain destination for fiat currency. To the author's knowledge, no Tezos-native DEX supports fiat credit card deposits or bank account deposits at this time. Users in this scenario have their best exits at fiat-to-CEX, then buying XTZ via the order book, withdrawing XTZ to a Temple wallet address from the CEX, then using DEXs natively from that point forward for in-chain swapping. Anyone tracking tezos as an emerging tier 1 network might expect to see improvements to DEX swap conditions as more liquidity enters the network, but as it stands buying directly with fiat and sending to CEX first is the cheapest solution for fiat-to-XTZ entry.
