Fees

DOES CRYPTOCURRENCY’S DECENTRALISATION MEAN NO FEES?

Fees are an everyday expectation when it comes to using fiat currency.
Credit card fees, transaction fees – almost every possible use of traditional currency brings with it the accepted reality that banks, corporate bodies, retailers and governments will add fees.

While much of these realities were the inspiration behind the birth of a feeless cryptocurrency, its growth in popularity and wider use means cryptocurrency has somewhat departed from the original vision with the rise of a global service industry.
Countless companies have appeared harnessing the opportunities provided by cryptocurrency to specialise in providing related goods and services, exchange platforms and security options.
While these companies threaten to convince cryptocurrency users that there is no such thing as a feeless form of digital currency, there have been some basic forms of fee charges attached to cryptocurrency since its earliest Bitcoin form.

Bitcoin users understand that fees have become important in determining the speed of transaction verifications.

Bitcoin’s blockchain has become increasingly slow at verifying transactions with the significant growth of the number of users on its network and transaction requests coming through.
Bitcoin’s algorithm, and many other altcoin blockchains based on Bitcoin’s original blueprint, are all designed to prioritise users attaching the highest fee to their transaction requests.
This puts users willing to offer the most cryptocurrency to its network of miners at the front of the queue, significantly reducing waiting times for transactions to be confirmed and processed.

WHAT HAPPENS IF I DON’T PAY FEES?

Fees were optional during cryptocurrency’s earliest years, when transactions were far less frequent and networks processing requests were made up of a fraction of their huge modern-day grids of nodes.
The added traffic alone means the dream of feeless transactions is almost impossible for many cryptocurrencies, with any transaction requests made without the attachment of a fee falling at risk of becoming stuck or troubleshooting.

StuckStuckAn unconfirmed transaction yet to be included in a block and remaining incomplete.

Most users in the situation of a stuck transfer take similar action, whether it be waiting patiently for the transfer to process or place an RBF (replace by feature).
An RBF readvertises the transaction request to a blockchain network with a higher bidding price, effectively allowing another opportunity to push the request through the network.

RBFRBFA node policy allowing an unconfirmed transaction to be replaced with a different transaction, spending at least one of the same inputs and paying a higher transaction fee.


For cryptocurrency senders wanting to get to the front of the transaction queue they need to know how to calculate fees.
Understanding the size of a fee required to have a transaction processed in a timely manner involves working out a balanced offer satisfying miners in charge of verifying the transactions, while also making sure not to overvalue the request.
This usually involves considering the size of the transaction, specifically how much computer power it will take a miner to complete the algorithmic puzzle required to confirm the transaction.

The larger the transaction usually means a larger fee is required, though a large fee on a small transaction will likely mean a much faster confirmation.
Feerate FeerateMiner fees spenders may include in on-chain transactions, collected by the miner who includes the transaction in a block. is what measures the cost of a transfer on the Bitcoin blockchain network, providing a number equivalent to Satoshis (฿0.00000001) per bite of data.

HOW DO I CALCULATE A FEERATE?

Most cryptocurrency wallets will calculate and produce a recommended feerate for users to consider, though many will choose to forgo the recommendation depending on the urgency of the transaction.
The higher the offered feerate, the more a sender is willing to pay per bite to better guarantee a faster verification process.

Like other cryptocurrency service providers, digital wallet manufacturers and their products have made a significant enough impact on the industry that they are now deemed a necessity when owning or using cryptocurrency.
This means the attached fees with purchasing these wallets is also considered an inevitable cost, as well as small fees incorporated and charged amongst transaction fees.
While most wallets’ fees structures are fluid, adjusting depending on the amount of traffic on blockchain networks, others set concrete fees making for a less competitive market rate.

Exchanges also enforce varying rates of fees for different actions, but most will charge users when trading cryptocurrency both during the act of trading and for fiat-to-crypto conversions.
These fees are known as maker and taker fees.
While exchanges use fees to maintain and upkeep their platforms, they also charge specifically to encourage traders to make larger transactions.
Exchange fees structure are generally designed to decrease in percentage as the size of the trade increases, encouraging users to put more money through the exchange.
These companies also want to encourage users to trade as frequently as possible, and so decrease fees with greater trade regularity.

Using crypto: Fees

FAQ

Does using cryptocurrency cost anything in fees?
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Countless companies have appeared harnessing the opportunities provided by cryptocurrency to specialise in providing related goods and services, exchange platforms and security options. While these companies threaten to convince cryptocurrency users that there is no such thing as a feeless form of digital currency, there have in fact been some basic forms of fee charges attached to cryptocurrency since its earliest Bitcoin form.

Are there fees for transferring cryptocurrency?
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Fees were optional during cryptocurrency’s earliest years, when transactions were far less frequent and networks processing requests were made up of a fraction of their huge modern-day grids of nodes. The added traffic alone means the dream of feeless transactions is almost impossible for many cryptocurrencies, with any transaction requests made without the attachment of a fee falling at risk of becoming stuck or troubleshooting.

What kind of fees come with buying and using cryptocurrency?
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For cryptocurrency senders wanting to get to the front of the transaction queue they need to know how to calculate fees. Understanding the size of a fee required to have a transaction processed in a timely manner involves working out a balanced offer satisfying miners in charge of verifying the transactions, while also making sure not to overvalue the request.

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