Cryptocurrency transaction fee is another concept that causes confusion most especially for new traders.
Most of the so-called crypto experts did not fully understand the changes in cryptocurrency transaction fee.
What is transaction fee?
Transaction fee is the amount paid when cryptocurrencies are transferred from one wallet to another.
The transaction fee serves as compensation for miners and validators that confirm transactions on the blockchain.
Just as the cryptocurrency market is volatile, the transaction fee also keeps changing.
Factors that affect cryptocurrency transaction fee
Different transaction fees can be charged on the same transaction amount.
The difference is caused by any of the following factors.
- The sending address/wallet
Transaction fees on most exchanges are fixed and sometimes they are increased.
For instance, USDT TRC20 withdrawal on Binance at the beginning of the year was free before it was increased to 1 USDT.
The transaction fees on exchanges are not the actual cost on blockchain. They are decided by each exchange.
If you are sending from an exchange, the transaction fee might be constant regardless of the amount.
- The type of blockchain
It is important to note that each cryptocurrency has its own blockchain.
In the case of bitcoin, all pending transactions are gathered in a memory pool (mempool) where they are to be picked by miners.
When the mempool is full, miners go for the transactions with the highest fees first.
This is done so as to maximize their own profit that is why when sending cryptocurrency from some wallet, you will be asked to choose whether you want priority, normal or slow transaction.
Ethereum on the other hand offers more sophisticated features than bitcoin.
Transaction fees on ethereum are measured in gas which is a small fraction of ether.
Ripple (XRP) is very different from the aforementioned cryptocurrency.
Since there are no miners generating new XRP, the transaction fee is very small and negligible.
TRON and EOS are another category of cryptocurrency.
Rather than using the actual cryptocurrency as fee, the blockchain uses bandwidth and resource credit credit respectively.
Therefore, the kind of cryptocurrency you are sending can be a determinant of the transaction fee.
You can use $1 to send $10 worth of bitcoin while using trx, you can send $10 without any fee.
- Size of the transaction
While sending a cryptocurrency, the amount involved is one of the factors that influences the transaction fee.
It is irrational to send $10 worth of cryptocurrency and $10,000 worth with the same amount.
- Block space required
After considering the kind of cryptocurrency and blockchain.
It is important to note that larger transactions require more blockspace compared to low amounts.
When the required blockspace is high, a higher fee might be required to process the transaction faster.
Even if all the above factors are satisfied, the number of transactions per second on the blockchain cannot be overemphasized.
This is more evident when the price is going higher.
There tends to be more people sending cryptocurrency and thereby leading to congestion.
For instance, the ethereum transaction fee skyrocketed with the advent of decentralized applications and NFT.
Also, when ethereum broke new ATH, the transaction fee was also at the peak.
Regardless of the above factors, you can send your cryptocurrencies at the lowest rate using kurepay.
Also, you can easily convert your cryptocurrency to fiat without stress.