Why does everyone have their coins in a single place instead of their wallet? Aren't transfers in and out of wallets basically free?
I dont do cryptocurrency, so I'm not familiar with the buying and selling, but why aren't the coins you buy put directly into your wallet?
For Bitcoin, not even close. Median fee is $10 now. Several days ago it was as high as $25. The mean is much higher, roughly double the median at any given time.
So for internal transfers, you can just update the good old relational database and dodge the fees.
For transfers between exchanges, they can settle the net balance daily (or have some thresholds etc) to minimise any actual on-ledger transfers.
Of course all this makes the decentralized aspect of the currency pointless, but most people don't actually understand or care.
Assuming their experience is primarily within a regulated banking system, they would not know about the numerous security precautions you need to take to 'be your own bank'.
Not the mention the fees are prohibitive for moving small to medium amounts.
You accept cash from credit cards with risk of clawback etc., transaction costs for money major cryptos (bitcoin, ethereum) are through the roof, you need lots of users to make a liquid market plus cost of infrastructure and development.
I don't see how an exchange is making money unless it charges ++% pr. transaction or does something that invites fraud and sudden collapse like keeping all crypto in a single wallet.
As far as I know, they all do. An exchange's users foot the bill (plus a premium) for on-chain transaction fees if they want to withdraw their coins to a private wallet. But not only that, the real money is in fees for trading coins on the exchange. You slap a little bitty 0.25% fee on every trade, and all of a sudden the jillions of day-traders trying to make money swapping BTC for DOGE or whatever other altcoin-of-the-day and back are a firehose of cash. Those trades are just taking place in your database, not on-chain, so your costs for servicing them are tiny.
Running an exchange should be like running a casino: a license to print money. Of course, stealing all the money on the table at once is tempting too...