What Are Bitcoin, Ethereum and Dogecoin Transaction Fees And How To REDUCE TRANSACTION FEES?

Transaction fees serve two essential purposes
when it comes to blockchain networks. They reward miners or validators who help
confirm transactions and help protect the network from spam attacks. Transaction fees can be both small or large,
depending on the network activity. Market forces can also influence the fees
you pay. While high fees can hinder wider blockchain
adoption, very low fees could potentially bring security concerns. Why transaction fees? Transaction fees are and have been an essential
part of most blockchain systems since their inception.

You are most likely to have come across them
when sending, depositing, or withdrawing crypto. The majority of cryptocurrencies use transaction
fees for two important reasons. First of all, fees reduce the amount of spam
on the network. It also makes large-scale spam attacks costly
and expensive to implement. Secondly, transaction fees act as an incentive
for users that help verify and validate transactions. Think of it as a reward for helping the network. For most blockchains, transaction fees are
reasonably cheap, but they can get quite expensive depending on network traffic. As a user, the amount you choose to pay in
fees determines your transaction's priority in being added to the next block. The higher the fee paid, the quicker the confirmation
process. Bitcoin transaction fees. As the world's first blockchain network, Bitcoin
set the standard for transaction fees used by many cryptocurrencies today. Satoshi Nakamoto realized that transaction
fees could protect the network from large-scale spam attacks and incentivize good behavior.

Bitcoin miners receive transaction fees as
part of the process of confirming transactions to a new block. The pool of unconfirmed transactions is called
the memory pool (or mempool). Naturally, miners will prioritize transactions
with higher fees, which users agreed to pay when sending their BTC to another bitcoin
wallet. Malicious actors who wish to slow down the
network must therefore pay a fee associated with each transaction. If they set the fee too low, miners will likely
ignore their transactions. If they put them at a suitable level, they
incur a high economic cost. So, transaction fees also act as a simple
but effective spam filter. How are BTC transaction fees calculated? On the Bitcoin network, certain crypto wallets
allow users to set their transaction fees manually. It's also possible to send BTC with zero fees,
but miners will most likely ignore such transactions, meaning they won't be validated. Unlike some tend to believe, Bitcoin fees
are not dependent on the amount sent but on the transaction size (in bytes).

For example, imagine your transaction size
is 400 bytes, and the average transaction fee is now at 80 satoshis per byte. In that case, you would have to pay around
32,000 satoshis (or 0.00032 BTC) for a good chance of having your transaction added to
the next block. When network traffic is high, and there is
a great demand for sending BTC, the transaction fee needed for speedy confirmation rises as
other bitcoin users try to do the same. This may occur during periods of intense market
volatility. As such, the high fees can make it challenging
to use BTC in day-to-day situations. Buying a $3 cup of coffee might not be practical
if the fees are much higher than that. Only a certain number of transactions can
be included within a block, which has a limit of 1MB (i.e., block size). Miners add these blocks to the blockchain
as quickly as possible, but there is still a limit to how fast they can go. The scalability of cryptocurrency networks
is a crucial issue here in deciding network fees. Blockchain developers are making continuous
efforts to address the problem. Previous network updates have helped improve
scalability, such as the implementation of SegWit and the Lightning Network.

Ethereum transaction fees. Ethereum transaction fees work differently
in comparison to Bitcoin's. The fee takes into account the amount of computing
power needed to process a transaction, known as gas. Gas also has a variable price measured in
ether, the network's native token. While the gas needed for a specific transaction
can stay the same, gas prices can rise or fall. This gas price is directly related to network
traffic. If you pay a higher gas price, miners will
likely prioritize your transaction. How are Ethereum transaction fees calculated? The total gas fee is simply a price that covers
the cost, plus an incentive to process your transaction.

However, you should also consider the gas
limit, which defines what's the maximum price paid for that transaction or task. In other words, the gas cost is the amount
of work required, and the gas price is the price paid for “each hour” of work. The relation between these two and the gas
limit defines the total fee for an Ethereum transaction or smart contract operation. Let's pick a random transaction on Etherscan.io
as an example. The transaction cost 21,000 gas, and the gas
price was 71 Gwei. So, the total transaction fee was 1,491,000
Gwei or 0.001491 ethereum. As Ethereum makes its way towards a Proof
of Stake model (see Casper), there is an expectation that gas fees will decrease.

The amount of gas needed to confirm a transaction
will be lower as the network will need only a fraction of the computational power to validate
transactions. But, network traffic can still affect transaction
fees as validators prioritize higher-paying transactions. Binance Chain transaction fees. Binance Chain is a blockchain network that
allows users to transact and trade BNB and other BEP-2 tokens. They can also create and distribute their
own tokens. Binance Chain adopts a consensus mechanism
called Delegated Proof of Stake. So instead of miners, we have validators. Binance Chain also powers the Binance DEX
(decentralized exchange), where users can trade cryptoassets directly from their wallets. Transaction fees on the Binance Chain and
DEX are paid in BNB. Note that Binance Chain and Binance Smart
Chain are two different blockchains. For more information, please see An Introduction
to Binance Smart Chain (BSC). How are Binance Chain transaction fees calculated? Depending on the action you wish to take,
a fee structure denoted in BNB is applicable.

There is a distinction between transaction
fees, like sending BNB, and trading fees on Binance DEX. Also, the total price of a transaction can
rise or fall depending on BNB's market price. When making non-trade-related transactions,
such as withdrawing or depositing BNB into a wallet, fees are payable only in BNB. Fees for trade-related activity on Binance
DEX are payable in the traded token, but there is a discount for paying in BNB. This scheme helps to incentivize BNB adoption
and build up its user base. Binance Smart Chain transaction fees. Binance Smart Chain (BSC) is another blockchain
built by Binance, which runs in parallel to the Binance Chain (i.e., two separate networks). While the BNB running on the Binance Chain
is a BEP-2 token, the BNB on the BSC is a BEP-20 token.

The Binance Smart Chain allows for the creation
of smart contracts, which makes it more customizable. The fee structure for BSC isn't fixed like
the Binance Chain. Instead, a gas system is used (similar to
Ethereum), reflecting the computing power needed for executing transactions and smart
contract operations. The BSC network runs a Proof of Staked Authority
consensus mechanism. Users of the network need to stake BNB to
become a validator, and upon the successful validation of a block, they receive the transaction
fees included. How are Binance Smart Chain transaction fees
calculated? As mentioned, the BSC fee structure is very
similar to the one found on Ethereum. The transaction fees are denoted in Gwei,
which is a small denomination of BNB equal to 0.000000001. Users can set their gas prices to prioritize
their transactions added to the block. To find out the current and historical average
price of gas, BscScan provides a daily average along with the lowest and highest price paid. As of March 2021, the average fee on BSC is
around 13 Gwei. In the example below the gas price was 10
Gwei.

Note that the gas limit was set to 622,732
Gwei, but only 352,755 (52.31%) Gwei was used in this transaction, resulting in a transaction
fee of 0.00325755 BNB. The BSC fees are usually very low, but if
you try to send tokens without BNB in your account, the network will notify you that
you have insufficient funds. Make sure you keep some extra BNB in your
wallet to pay for your transaction fees. Binance withdrawal fees. When you make withdrawals on the Binance exchange,
you have to pay associated transaction fees. These fees vary depending on the cryptocurrency
and network you use. Binance has its own fee structure for transactions
that happen inside its trading platform. However, withdrawal fees are affected by external
factors that are not under Binance's control.

Withdrawing your crypto relies on the work
of miners or validators who aren't part of the Binance ecosystem. As such, Binance has to adjust the withdrawal
fees periodically, based on network conditions that include traffic and demand. Binance also sets minimum limits on the amount
of crypto that can be withdrawn. You can look up the current limits on the
Fee Schedule page. Trading fees are based on your account VIP
level and are independent of withdrawal fees. Your cumulative monthly trading volume determines
your account's VIP level.

The maximum fee currently charged is 0.1%
of the crypto traded as both a maker or taker. Keep in mind that users who pay in BNB will
have lower fees when trading. Closing thoughts. Transaction fees are an integral part of the
crypto economics of blockchain networks. They are part of the incentives given to users
that keep the network running. Fees also offer a layer of protection against
malicious behavior and spam. However, the amount of traffic that some networks
receive has led to significantly higher fees. The decentralized nature of most blockchains
makes it harder for them to scale. It's true that some networks present high
scalability and transaction throughput, but that often comes with a sacrifice of either
security or decentralization. Still, there are several researchers and developers
working on improvements that will hopefully bring more inclusion when it comes to cryptocurrencies
in the developing world.

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