Cryptocurrency Transaction Fees for Beginners

From this article you will learn about cryptocurrency transaction fees, their kinds, and features
12 February 2018   3492

When you’re investing in cryptocurrency, you have to deal with cryptocurrency transaction fees. Due to the decentralized nature of cryptocurrencies, you have to pay for using a network of a crypto as well. The network needs to be incentivized to verify all the transactions occurring on the blockchain, and you as a user are paying for that.

There are 3 types of transaction fees when dealing with cryptocurrencies:

  • Exchange fees
  • Network fees
  • Wallet fees

Exchange Fees

Whether you want to convert your fiat currencies to crypto or trade your crypto holdings for other cryptos, the safest and easiest way to do this is through a crypto exchange. Exchanges do not provide these services for free and to generate an income, they charge a fee on every trade you make on their exchange. Every exchange charges different transaction fees and it can save you quite some money to research which exchanges have the most favorable fee policies.

Fixed Trading Fees

Bittrex, for example, takes a 0.25% cut. Bittrex doesn’t separate buyers and sellers and the 0.25% transaction fee is a set number. So if you sell 2 NEO, you will pay 0.0050 NEO for that transaction and if you buy 4 BAT, you will pay 0.01 BAT. In addition, Bittrex doesn’t charge you for deposits and withdrawals.

Bittrex web-siteBittrex web-site

Binance charges a flat 0.1% fee for executing trades on its exchange, regardless of whether you're buying or selling and using limit or market orders for transactions. For example, If you bought 1,000 TRX using ETH as the base currency, the 0.1% fee of 1 TRX will be applied and automatically deducted from your order, netting you 999 TRX. An additional feature of Binance is that you can decrease your trade fees by 50% by using their own cryptocurrency, BNB, for trading.

Binance web-siteBinance web-site

Maker-Taker Model

Kraken, Poloniex and Bitfinex charge transaction fees based on a maker-taker model. The maker is the party that wants to sell a crypto on the market and the taker is the party that buys. Both maker and taker are charged a trading fee but the maker is always better off in this model.

The three exchanges mentioned above lower their transaction fees when you have trade volumes above a set threshold. Usually, this threshold is valid for a 30-day period. For example, your trade fees will decrease on an exchange if your total trade volume reaches over $50,000 in 30 days.

Bitfinex web-siteBitfinex web-site

Network Fees

Network fees are the second type of fees you pay to the miners of a cryptocurrency. All transactions that happen on the blockchain need to be verified by the network. This is done by the miners.

It is important to understand that all blockchains have their own system for transaction fees. Say that you send your recently purchased Bitcoin from Bitfinex to a personal wallet. You will enter your public key into the Bitcoin withdrawal option of Bitfinex and press send. The transaction will become a line of code which is sent to the Bitcoin network for verification.

Transactions are not confirmed individually, but they are put together, forming a block of data. When this block is full, the verification will be conducted by a miner. Once the block is solved, it is added to the blockchain. 

For solving this block, verifying a number of transactions, the miner is rewarded. This reward comes from the transaction fees paid by the parties making the transactions. The miner receives all the transaction fees set for a block.

Network Price Determinants  

Transaction fees are set by the miners themselves and the sending parties can accept or decline this cost. A miner could set extraordinarily high transaction fees, but no one would accept those transaction fees. The miner will not be assigned any blocks to solve because these blocks will be sent to another miner with transaction fees that are accepted by the sending parties.

There is a potential problem of miner centralization, which is similar to forming a cartel to ensure a certain profitability, as the miners want the highest transaction fees possible. If an entire network agreed upon a certain price for the transaction fees, they could decide to set an unreasonably high price. 

Managing Transaction Fees

The number of transactions a blockchain network can handle per second is limited. With an increasing number of users, more and more transactions need to be processed. This means that in order to ensure your transaction is verified first, you will have to outbid an increasing number of transactions. This comes down to setting a higher transaction fee.

You set the total transaction fee and this is not relative to the amount you’re sending but to the length of the code that needs to be solved. If you’re sending $500,000 worth of a crypto, you won’t mind paying a few dollars in transaction fees. However, if you send $5, you will definitely mind. This means that small transactions are being priced out of the market. A solution for this problem is increasing the limit of possible transactions per second.

Some wallets let parties set a transaction fee they are willing to pay for their transactions. You can adjust your transaction fee preferences in the wallet’s settings. Most wallets provide a predetermined price that will ensure your transaction will come through within a given time frame. 

However, the lower the transaction fees you are willing to pay, the longer it will take for your transaction to be verified because it will have a lower priority for the miners, who are motivated to solve the block with the highest transaction fees first.

Wallet Fees

The last kind of fee is a fee for using a wallet. You use wallets to safely store your cryptos, and the wallets’ software development and updates aren’t free. You pay minor fees for using a wallet which go to the company that created it. You can check your fees in the wallet settings.

Creating a new address for a cryptocurrency, a wallet, also needs to be verified by the network of the cryptocurrency. This can occur for both personal wallets as well as for wallets on exchanges. Whether you are charged depends on the blockchain of a cryptocurrency. In the case where you have to pay a wallet fee, you will be charged on the first deposit you make to that wallet.

Top Ongoing ICO 23rd - 29th September

Check these cool new ICOs: Modex, Coin Analyst, eLYQD, BitNautic, Pool of Stake, Tachain and Solidfied
23 September 2018   158

Every week we find a large number of projects which are holding Initial Coin Offerings in order to be able to bring their incredible ideas to life. There are a lot of news regarding ICO and cryptocurrency, and we do our best to report about the updates released, or the crypto conferences held all over the world. And now it’s time to look at the ICO market! In a list below you will find our reviews of the projects we consider worth looking at this week. As you already know, Hype.Codes team is working hard to deliver all top-notch ICO news!

Current list for quick navigation Modex, Coin Analyst, eLYQD, BitNautic, Pool of StakeTachain, Solidfield

Ongoing ICO

Don’t forget to read to the bottom and take part in our poll about upcoming ICOs.

1. Modex

Hype.Codes rate  92

Modex has built a Smart Contract Marketplace and a Blockchain Developer Tools Platform. Modex aims to become the go to place for developers looking to monetize their blockchain programming skills and increase their revenue, as well as companies in need of blockchain development services and ready-to-buy smart contracts.

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Sales dates: Sep 15th - 25th
Accepted currencies. Various
Cap 10577066 USD
Website and Whitepaper 

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2. Coin Analyst 

Hype.Codes rate  90

CoinAnalyst is an information and analysis platform for all cryptocurrencies and ICOs worldwide. Purchase and sale decisions can be made on the basis of valid data and intelligent analyses. This enables the user to identify opportunities and risks and react promptly and proactively to price fluctuations. The application thus creates a high degree of transparency when it comes to operating in this new and volatile market.

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Sales dates: Jul 7th - Oct 31st 
Accepted currencies. ETH
Hard cap 20M EUR
Website and Whitepaper 

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3. eLYQD 

Hype.Codes rate  89

One of the main features of eLYQD is the use of blockchain technology, which allows making the platform transparent, open and as safe as possible for both transaction parties, reduction of transaction and business costs, and simplifying of the purchase process.

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Sales dates: Jul 9th - Sep 30th
Accepted currencies. ETH
Soft cap $2M
Hard cap $15M
Website and Whitepaper 

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4. BitNautic 

Hype.Codes rate  85

BitNautic is a decentralized platform, based on the Ethereum Blockchain, for matching demand and supply of shipping services, for all the industry stakeholders: producers of goods, ship owners, charterers, brokers, importers and exporters. BitNautic comes with distinctive features like AI (Artificial Intelligence) based booking system, a real-time tracking of ships and cargo, and a wholesale e-commerce platform.

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Sales dates: Jul 11th - Sep 30th 
Accepted currencies. ETH, BTC, LTC, ZEC, BCH, DASH, DCR, XMR, Fiat
Soft cap 5k ETH
Hard cap 50k ETH
Website and Whitepaper 

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5. Pool of Stake 

Hype.Codes rate  80

Qtum, Stratis, Universa and soon Ethereum holders can unite in the Pool of Stake and start staking together. Pool of Stake aims to operate in all types of PoS blockchains- Smart Contract platforms or blockchains with a delegated mechanism. The main goal for Pool of Stake is to increase the profits for small stakers by enabling a trusted environment to pool funds together. For this purpose, two ERC-20 tokens are used. First, the PSK token that gives discounts an rewards withdrawal fees. Second, an IOU token that acknowledges the user’s investment. The PSK platform will provide an analytics tool via a smart i.o. database that will allow members to track, control and optimize their investments. In this white paper, we explain the implementation of Pool of Stake and its services. We elaborate the governance vision which will be developed in the coming months to ensure that the PSK community remains.

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Sales dates: Jul 20th - Sep 30th
Accepted currencies. ETH
Soft cap $2M
Hard cap $8M
Website and Whitepaper 

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6. Tachain  

Hype.Codes rate  79

Tachain provides comprehensive ad targeting system for advertisers while maintaining full security and effectiveness of a full scale transportation app. With our functionalities in play, we are in a position to steer toward our mission of providing a valid and secure blockchain based service full of fun and joy to our users.

Vote for this ICO

Sales dates: Jul 23rd - Dec 31st 
Accepted currencies. ETH
Soft cap $2M
Hard cap $10M
Website and Whitepaper 

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7. Solidfied 

Hype.Codes rate  80

The future will be built on smart contracts. Smart contracts are only as secure as the code they are written in. As they are immutable after release, they need reliable security due diligence to earn companies and users trust and value. With 200+ code experts and 400k ETH of market cap. secured, Solidified is the market leader in smart contract security already. We know the market and its bugs. It's still fully centralized which allows for fraud and hacks and bad or lazy work hardly has consequences for the auditor. We can fix this. Introducing the first decentralized audit system & Bug Prediction Market! Actors can stake on whether a vulnerability will be discovered in a smart contract by a certain date. The basis for such a market is a smart contract that has been audited and secured by an individual or a group of auditors using the Solidified platform. These actors are held accountable for securing the code by having staked income and reputation in the form of the Solid Token.

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Sales dates: Jul 23rd - Oct 23rd
Accepted currencies. ETH
Hard cap 36k ETH
Website and Whitepaper 

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