Cryptocurrency transaction fees - what are the fees for?
Cryptocurrencies are very popular these days. New coins are created all the time, blockchain networks are growing. If you want to trade digital currencies, you need to know that there is a phenomenon of transaction fees that can apply to various types of activities. What is the money charged for? We invite you to read.
Various transaction fees - cryptocurrencies
There are a number of different transaction fees when trading cryptocurrencies. The most important are network, stock and wallet fees. The first concerns the amounts allocated to the network, i.e. for miners providing their services (currencies must be mined by miners for a new block to be signed in the blockchain and thus for the transaction itself to be saved). It can be seen that the amount of transaction fees on the network depends on the current demand for a given currency. The second concerns the amounts collected by cryptocurrency exchanges for the purpose of buying or selling. This is usually the main source of income for the exchanges mentioned. Wallet transaction fees, on the other hand, are typically charged when funds are transferred between different wallets or from the wallet to an exchange.
The various cryptocurrency transaction fees are fully understandable, especially since so many similar fees are associated with bank accounts (e.g. fees for withdrawing cash or quick transfer).
Why are transaction fees needed?
It can be assumed that the most important cryptocurrency transaction fees are those intended for the network. They constitute the so-called PoW (proof of work), it is an anti-spam protection. In addition, they encourage miners to process transactions, and we remind you that this will become valid when it is saved in a block attached to the blockchain network. For this reason, many people specifically charge higher fees so that their transactions can be saved faster - they become a priority for miners.
It is also worth mentioning the phenomenon of standard bank transaction fees related to international transfers. It turns out that you can pay up to PLN 100 for sending PLN 5,000, while if the funds are transferred via cryptocurrency, transaction fees can be up to five times lower.
The amount of transaction fees depends on many factors. First of all, it is the type of transaction, the amount of funds transferred and the cryptocurrency. For example, donating US $ 5,000 costs about $ 5, while Ethereum costs about $ 3. For lesser-known currencies, the cost may go below the dollar. This is due to the fact that mining Bitcoin and Ethereum is much more time consuming and therefore requires more complex calculations by miners. If the fees were lower, the miners might not be sufficiently motivated to act.
Cryptocurrency trading fees are low!
It is the transaction fees that show a significant advantage of cryptocurrencies. They are much lower than the amounts required by institutions like banks. You can pay just a few dozen dollars for a transfer of several million dollars in cryptocurrency. However, it is worth remembering to check the current amount of transaction fees, as these can be drastically higher when the network is overloaded.
Do you want to trade cryptocurrencies without major fees?
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Attention! The above article neither in whole nor in part constitutes a "recommendation" within the meaning of the provisions of the Act of July 29, 2005 on trading in financial instruments or the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of April 16, 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6 / EC of the European Parliament and of the Council and Commission Directives 2003/124 / EC, 2003/125 / EC and 2004/72 / EC and Commission Delegated Regulations (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65 / EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of this directive. The content contained on the website does not meet the requirements for recommendations within the meaning of the above-mentioned act, incl. do not contain a specific valuation of any financial instrument, do not rely on any valuation method, and do not identify investment risk.