How the exchange designs credit limits - a more controllable internal credit model

In fact, I have indeed considered giving VIP limits through the exchange and have discussed this matter with Tony (a friend from Singapore).

My idea isn’t about being VIP, but rather that all transactions by users on the exchange are actually recorded, including the expenditure on transaction fees. If the exchange could introduce a type of "credit limit" based on these transaction fees, it would be possible.

For example, if I have paid $10,000 in transaction fees at a certain exchange, then in reality, it could give the user an internal credit limit of 20% or 30% of the transaction fees. This credit cannot be withdrawn but can be used to open orders, contracts, spot trading, futures, or even wealth management.

Because this amount of money has already been paid by the user, the exchange offering this is essentially giving up a portion of its profit. However, for the user, this is equivalent to a credit card limit.

Of course, if this credit limit is exhausted and cannot be repaid, then there is indeed no way for the exchange to recover, and it will incur losses. However, if this user returns and continues to make transactions on Binance, they will need to replenish this credit limit; without replenishing it, they cannot continue trading.

Of course, one might say that this user can go to other exchanges, but I believe that if a leading exchange offers similar services, it is highly likely that many exchanges will consider it too. This is a very practical form of "credit." It has nothing to do with how much money you have in your account, as this is money that the user has already spent.

So what are the benefits of doing this?

I will give an inappropriate example; casinos always say they are not afraid of users winning, but rather afraid that users won't come. What kind of users obviously want to win, but they are not the only ones? Of course, it’s those who have lost everything.

Therefore, in most casinos, there will definitely be lending, don’t laugh, it seems cruel, but this is part of the system. So cryptocurrency isn’t gambling, but what often leads to bankruptcy are high leverage and contracts, meaning that users will leave the table only when they run out of money.

And a user leaving is not a good business for the exchange. Therefore, good exchanges will not actively exploit users; it's better to earn through transaction fees.

So if a "credit mechanism" can be used, even investors who have lost everything will have a chance to "try again," and this opportunity does not require the exchange to cover the funds; instead, it uses a small portion of the money that the user has previously paid as the user’s starting capital.

Of course, this credit mechanism can also have some limitations, such as not allowing leverage greater than three times, etc. These are effective mechanisms to prevent users from taking undue risks. For users, this kind of credit used must be repaid, just like a credit card, it can be withdrawn in advance, but withdrawing may require certain conditions. These are all details in the design.

Overall, what I can think of is that this is an executable "credit" limit. However, it shouldn’t be called credit; it’s more like a refund of transaction fees but can be designed as a credit model.

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