The FTX Business Model – How Does FTX Make Money?

Executive Summary:

FTX is a centralized cryptocurrency exchange focused on derivatives and other types of financial instruments.

FTX makes money from various trading fees, interest from loans, interchange and payment fees, listing and transaction fees from its NFT marketplace, and by selling stock in the firms it invests in.

Founded in 2018, FTX has risen to become one of the world’s leading cryptocurrency exchanges. It is currently valued at $25 billion.

What Is FTX?

FTX is a FinTech company that provides a centralized cryptocurrency exchange focused on derivatives and other financial instruments.

Users can buy and sell futures, options, leveraged tokens, fiat as well as cryptocurrencies, and even non-fungible tokens (NFTs).

FTX targets both retail as well as institutional traders, with the latter being served by the platform’s own over-the-counter (OTC) platform.

Apart from its trading platform, users can also opt into the firm’s own debit card which allows them to spend their crypto assets in the physical world.

Not all of the above features and products are available anywhere due to limited regulatory approval. FTX US, the platform’s North American arm, limits access to some of the riskier financial instruments.

Additionally, FTX has also developed a platform-native utility token called FTT, which can be used to transact on the exchange at reduced rates or earn interest.

FTX can be accessed by either visiting the platform’s website or downloading its mobile application (available on Android and iOS devices).

How FTX Started: Company History

FTX, which is headquartered in the Bahamas, was founded in 2018 by Sam Bankman-Fried and Gary Wang.

Bankman-Fried, whose parents are both law professors at Stanford University, graduated with a degree in Physics from MIT in 2014.

Instead of becoming an academic just like his parents, he decided to take a job at quant firm Jane Street Capital for which he was primarily trading ETFs.

The career choice was inspired by his deeply rooted belief in effective altruism, a theory that utilizes evidence, data, and logical reasoning to maximize the good you do in the world.

Working at a quant firm would therefore allow him to maximize his earnings, which he could then put towards projects and organizations that aligned with his belief system.

And that’s exactly what he did. Right after joining Jane Street Capital, he put a considerable amount of his six-figure salary into various projects.

His belief system is also what indirectly attracted him to the world of crypto. In 2017, when the price of Bitcoin skyrocketed all the way to $20,000, he spotted an arbitrage opportunity. Market inefficiencies allowed him to purchase bitcoin in the United States and sell it on Japanese exchanges for as much as 30 percent more.

The profits from those trades eventually allowed him to branch out on his own. In November 2017, he launched Alameda Research, a quantitative cryptocurrency trading firm and liquidity provider. Moreover, friends and family (as well as his own savings) provided him with $1 million in seed capital.

He then moved from New York to Berkeley, California, where he hired a few recent college graduates and set up shop in a local Airbnb. By January 2018, the newly minted firm managed to move as much as $25 million worth of bitcoin – every day.

Ironically enough, he was doing all of that without knowing much about cryptocurrencies or the underlying technology that is the blockchain. However, due to the extreme market volatility, there were a lot of opportunities to take advantage of.

As time passed, though, Bankman-Fried and his team grew increasingly frustrated with the quality of mainstream exchanges. After all, they were mostly geared towards inexperienced retail traders and thus often only allowed to purchase or sell cryptocurrencies.

He, therefore, decided to change that with the launch of FTX, which he began working on towards the end of 2018. The initial development of the platform was financed with profits that he generated from Alameda and spearheaded by Gary Wang whom Bankman-Fried recruited from Google.

Half a year later, in June 2019, they finally unveiled FTX to the public. Not long after, the team managed to raise a first seed round of $8 million, with backers including Proof of Capital, Consensus Lab, and more.

Being one of the only platforms at the time that allowed investors to trade derivatives (on top of faster settlement times and lower fees) immediately attracted thousands of users to FTX. And the company capitalized on that distinction by quickly expanding the number of available financial instruments. For instance, at launch, it introduced the Shitcoin Index Perpetual Futures (long for SHIT-PERP), an index of 58 low market cap coins.

To cap the year off, FTX raised another round of funding from a close ally. In December, Binance invested $70 million into the exchange. Furthermore, as part of the deal, Binance also purchased long positions in the FTX Token, FTT, the platform’s native coin which launched right after the platform went live.

By February 2020, on the back of the launch of TRUMP, BIDEN, BERNIE, BLOOMBERG, or WARREN coins which allowed users to bet on the outcome of the presidential election, FTX had risen become the fifth largest exchange by volume.

Once again, the company capitalized on its ever-growing relevance by issuing a public FTT token sale in March. For a minimum investment of $250,000, backers would be able to acquire real equity in FTX. The token sale would value the company at exactly one billion dollars, officially allowing it to enter the unicorn club nine months after launching.

Despite its exponential growth, there was still tons of market share to be captured. As a result, FTX, in May, announced that it would finally launch in the United States, a market that to this date remains heavily regulated, which makes derivative trading tough to implement.

Much like Binance, FTX also began to expand into other verticals to take advantage of market opportunities. In July, it introduced Serum, a decentralized crypto exchange with derivatives that was built on the Solana blockchain (Bankman-Fried is also an investor in Solana Labs). The move put them in direct competition with other decentralized exchanges like Uniswap (which runs on the Ethereum blockchain).

A month later, FTX also announced its first-ever acquisition with the purchase of Blockfolio, a data provider for token prices and trade volumes, for $150 million. The intention behind the deal was to give FTX access to retail traders, which up until that point had largely neglected the service.

In fact, 90 percent of the trades on FTX were executed via its API, which normally meant that institutional clients and professional traders had built sophisticated software to programmatically execute trades (while using data from the API).

Later that year, FTX also tapped into the growing trend of tokenized stocks, which allowed users to trade high-demand shares (in tokenized form) from companies like Apple, Amazon, or Tesla. On top of that, FTX also introduced pre-IPO futures for soon-to-be-public companies like Airbnb and rival Coinbase.

2021 would certainly end up being just as successful as the prior year. In March, FTX made news by securing the naming rights to the home arena of NBA team Miami Heat for a whopping $135 million. The stadium would soon be called FTX Arena. 

Two months later, FTX had managed to amass enough cash to begin investing into other crypto-related projects, a model that has been popularized by competitors like Binance and Coinbase. Some of its investments include:

  • May 2021: participation in Circle’s $440 million private equity round, a move that allowed its retail subsidiary Blockfolio to be plugged into Circle’s payments infrastructure
  • August 2021: providing $120 million in debt capital to Liquid Global after it suffered a nearly $100-million hack
  • September 2021: participation in $431 million private equity round of Genesis Digital Assets
  • October 2021: participation in Sky Mavis (studio behind Axie infinity) $152 million Series B round
  • November 2021: leading $150 million Series C round of Chipper Cash

.. and many, many more. Talking about investments, FTX also began to heavily invest in marketing campaigns and sponsorships in an effort to establish itself in the United States. Deals included acquiring the naming rights to esports organization TSM for $210 million or sponsorship deals with the likes of the MLB, Riot Games, Tom Brady and Gisele Bundchen, Stephen Curry, and many other celebrities and organizations.

To finance those deals, FTX raised another $900 million at an $18 billion valuation in July. And in order to further appease regulators in the States, FTX announced that it would limit the amount of margin for traders from 100times leverage to 20 times.

Furthermore, FTX also hired people that would be capable of navigating the complex regulatory environment. In August, for instance, it hired former U.S. Commodity Futures Trading Commission (CFTC) attorney Ryne Miller as its general counsel.

That wasn’t the end of it, though. On August 31st, 2021, FTX announced the acquisition of LedgerX, a CFTC regulated futures and options platform. Not long after, LedgerX was integrated into FTX’s American arm FTX.US, providing them with a fully-regulated way to offer derivative trading to U.S.-based customers.

In late September, the company furthermore announced that it would move its headquarters from Hong Kong to the Bahamas, which at the time was one of the only countries in the world with a crypto regulation in place.

All of these moves not only allowed FTX to become the second-largest crypto derivatives platform by trading volume but enabled them to raise another massive round of funding. In October, it announced that it had attracted a total of $420,690,000 in funding, with the numbers ’69’ and ‘420’ paying homage to popular meme culture.

Today, more than 200 people are employed by the company, which operates virtual offices across the globe.

How Does FTX Make Money?

FTX makes money from various trading fees, interest from loans, interchange and payment fees, listing and transaction fees from its NFT marketplace, and by selling stock in the firms it invests in.

Let’s take a closer look at each of these in the section below.

Trading Fees

The vast majority of the revenue that FTX generates comes from the different fees that it applies whenever users trade on its platform.

FTX applies a tiered fee structure for all futures and spot markets, which can be found below:

These fees are reduced whenever a user stakes FTT, which means that he or she provides their crypto assets to support a blockchain network and confirm transactions.

With all but 25 FTT staked, users can already reduce their maker fees to zero percent. In addition, depending on how much is being staked, taker fees can be reduced to as much as 0.015 percent.

Users on the platform can also leverage their trades by borrowing (so-called margin trading). Borrowers are then charged a daily interest rate. A detailed explanation of how leveraged trading works, which is considered to be extremely risky, can be found here.

Lastly, FTX also imposes fees on leveraged tokens (such as ADAHEDGE, a token allowing to 1x short Cardano), namely creation and redemption fees of 0.10 percent and daily management fees of 0.03 percent.


FTX offers a line of credit to its most sophisticated traders vis-à-vis its over-the-counter trading product.

These users can apply for a loan if they meet certain criteria (which are not publicly disclosed and subject to each individual application).

FTX will then generate income from those loans through the interest it charges. The exact percentage is likely dependent on how much collateral a trader provides, his or her past trading performance, and more.  

Interchange & Payment Fees

Users on FTX can apply for a physical debit card that is powered by Visa. The debit cards are connected to the user’s account and allow them to spend whatever’s in on balance.

If a user does not possess sufficient amounts of USD, then FTX will convert the other coins held in the account until the purchase price is matched.

FTX makes money from the debit card through so-called interchange fees. These fees, which are paid by the merchant, are normally equal to about one percent. The fee is then likely split between FTX and Visa, the issuer of the card.

Apart from its debit card, FTX also offers a payments product called FTX Pay. The product allows others businesses, normally other websites or stores, to be paid in crypto or fiat currencies.

FTX charges a one-percent fee to allow businesses to receive payments. On top of that, merchants will also have to pay the associated blockchain fees, which in the case of FTX will be redirected to Solana.

NFT Fees

In September 2021, FTX launched its very own NFT marketplace (dubbed FTX NFTs), allowing users to mint, hold, authenticate, as well as trade digital collectibles.

The marketplace itself is built on the Solana blockchain. It supports all NFTs that conform to Solana’s Metaplex standard.

FTX generates income by charging a five percent fee to both the buyer and seller on each sale or trade.

Additionally, right after the marketplace launched, FTX also introduced a $500 listing fee for every new submission. The fee was a direct response to trolls who had flooded the marketplace with images of different fish.

Not long after, both Binance and Coinbase also moved into the crowded NFT space which is currently being dominated by OpenSea. The platform, for comparison, charges 2.5 percent for every sale.


As previously mentioned, FTX has also begun to heavily invest in other crypto and blockchain-related startups.

When the value of its shares appreciates, it can eventually sell them off for a profit during a future liquidation event (such as a secondary sale or IPO).

For instance, Binance had invested $70 million into FTX in December 2019. In July 2021, during the firm’s Series B, it was able to sell that stake back to FTX for a whopping $2.3 billion.

Investing in other crypto projects is a strategy that had initially been popularized by its rival Coinbase.

Not only do you get to participate in an exponentially increasing market but investments also allow the business to gain access to private data. FTX can then use that data to inform its own business decisions, for example, whether it wants to expand into a new product line.

Additionally, a lot of use cases in crypto are still thesis- or story-driven. By uplifting the entire industry, FTX will simply benefit from greater public acceptance and thus wider adoption, which ultimately leads to more customers.

FTX Funding, Revenue & Valuation

FTX, according to Crunchbase, has raised a total of $1.3 billion across five rounds of venture capital funding.

Notable investors include Sequoia Capital, Tiger Global Management, Ribbit Capital, Temasek, Institutional Venture Partners (IVP), and many others.

The company, after raising $420 million in Series B-1 funding in October 2021, is now valued at $25 billion.

Forbes estimates that FTX has generated around $750 million in revenue for the fiscal year 2020 (of which $350 million are pure profits).

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.