Résumé
Transaction fees serve two essential purposes when it comes to blockchain networks. They reward miners or validators who help confirm transactions and protect the network from spam attacks.
Transaction fees can be both small or large, depending on network activity. Market forces can also have an effect on the level of fees you pay. While high fees can hinder broader blockchain adoption, very low fees can potentially pose security concerns.
Why pay transaction fees?
Transaction fees have been an integral part of most blockchain systems since their inception. It is very likely that you have paid some when sending, depositing or withdrawing cryptocurrencies.
The majority of cryptocurrencies use transaction fees for two important reasons. First, the fee reduces the amount of spam on the network. They also make large-scale spam attacks costly to implement. Next, transaction fees provide an incentive for users to help verify and validate transactions. Think of it as a reward for helping the network.
For most blockchains, transaction fees are reasonably low, but they can get quite high depending on network traffic. As a user, the amount you choose to pay in fees determines the priority of your transaction to be added to the next block. The higher the fee, the faster 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 understood 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 in a new block. The pool of unconfirmed transactions is called a memory pool (or mempool). Naturally, miners prioritize transactions with higher fees, which users have agreed to pay when sending their BTC to another Bitcoin wallet.
Bad actors who want to slow down the network must therefore pay fees associated with each transaction. If fees are too low, miners will likely ignore their transactions. If they place them at an appropriate level, they incur a high cost. So transaction fees also act as a simple but effective spam filter.
How are BTC transaction fees calculated?
On the Bitcoin network, some crypto wallets allow users to manually set their transaction fees. It is also possible to send BTC without fees, but miners will most likely ignore these transactions, meaning they will not be validated.
Contrary to some beliefs, Bitcoin fees do not depend on the amount sent, but on the size of the transaction (in bytes). For example, imagine your transaction size is 400 bytes and the average transaction fee is now 80 satoshis per byte. In this case, you will have to pay around 32,000 satoshis (or 0.0032 BTC) to hope to add your transaction to the next block.
When network traffic is high and there is high demand for sending BTC, the transaction fees needed for rapid confirmation increase as other bitcoin users try to do the same. This can occur during periods of intense market volatility.
As such, high fees can make it difficult to use BTC in everyday situations. Buying a $3 cup of coffee may not be practical if the fees are much higher than that.
Only a certain number of transactions can be included in a block, the limit of which is 1 MB (i.e. the block size). Miners add these blocks to the blockchain as quickly as possible, but there is always a limit to how fast they can go.
The scalability of cryptocurrency networks is a crucial issue when deciding network fees. Blockchain developers are continually working to solve the problem. Previous network updates have improved scalability, such as the implementation of SegWit and the Lightning Network.
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Ethereum Transaction Fees
Ethereum transaction fees work differently compared to Bitcoin. These fees take into account the computing power needed to process a transaction, called gas. Gas also has a variable price measured in ether (ETH), the network's native token.
While the amount of gas needed for a specific transaction may remain the same, gas prices may increase or decrease. This gas price is directly linked 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 price is simply a price that covers the cost, plus an incentive to process your transaction. However, you also need to consider the gas limit, which defines the maximum price paid for that transaction or task.
In other words, the cost of gas is the amount of labor required, and the price of gas is the price paid for "each hour" of labor. The relationship between these two quantities and the gas limit defines the total fees for an Ethereum transaction or smart contract operation.
For example, if a transaction costs 21,000 gas and the gas price is 71 Gwei, the transaction fee will be 1,491,000 Gwei, or 0.001491 ETH.
Source : Etherscan.io
As Ethereum moves towards a proof-of-stake model (see Casper), gas fees are expected to decrease. The amount of gas required to confirm a transaction will be less, as the network will only need a fraction of the computing power to validate transactions. However, network traffic can still impact transaction fees as validators prioritize the most expensive transactions.
Binance Chain transaction fees
Binance Chain is a blockchain network that allows users to transact and exchange 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 supports Binance's DEX (decentralized exchange), where users can trade cryptos directly from their wallets. Transaction fees on 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 denominated in BNB is applicable. There is a distinction between transaction fees, such as sending BNB, and trading fees on Binance DEX. Additionally, the total price of a transaction may increase or decrease depending on the market price of BNB.
When making non-trading transactions, such as withdrawing or depositing BNB into a wallet, fees are payable in BNB only. Fees for trading activity on the Binance DEX are payable in traded tokens, but there is a discount for payments in BNB. This system helps encourage the adoption of BNB and grow its user base.
Binance Smart Chain transaction fees
Binance Smart Chain (BSC) is another blockchain built by Binance, which operates in parallel to the Binance Chain (i.e. two separate networks). While the BNB used on Binance Chain is a BEP-2 token, the BNB on BSC is a BEP-20 token.
The Binance Smart Chain allows the creation of smart contracts, which makes it more customizable. The fee structure for BSC is not fixed like that of Binance Chain. Instead, a gas system is used (similar to Ethereum), reflecting the computing power needed to execute transactions and smart contract operations.
The BSC network uses a Proof of Staked Authority consensus mechanism. Network users must stake BNB to become a validator, and upon successful validation of a block, they receive the transaction fee included in it.
How are Binance Smart Chain transaction fees calculated?
As mentioned, the BSC fee structure is very similar to that found on Ethereum. Transaction fees are expressed in gwei, which is a denomination of BNB equal to 0.000000001. Users can set the gas price to prioritize their transactions.
To find out the current and historical average price of gas, BscScan provides a daily average as well as the lowest and highest price paid. As of March 2021, the average fee on BSC is around 13 Gwei.
In the example below, the price of gas was 10 Gwei. Note that the gas limit was set at 622,732 Gwei, but only 352,755 (52.31%) Gwei were used by the transaction, thus generating a fee of 0.00325755 BNB.
Source : Bscscan.com
BSC fees are generally very low, but if you try to send tokens without BNB in your account, the network will notify you that you do not have enough funds. Make sure to keep some BNB in your wallet to pay for transaction fees.
Binance withdrawal fees
When you make withdrawals on the Binance exchange, you must pay the associated transaction fees. These fees vary depending on the cryptocurrency and network you use. Binance has its own fee structure for transactions that take place 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 are not part of the Binance ecosystem. Therefore, Binance must periodically adjust withdrawal fees based on network conditions which include traffic and demand.
Binance also sets minimum limits on the amount of cryptocurrencies that can be withdrawn. You can view the current limits on the Fee Structure page.
Trading fees are based on the VIP level of your account and are independent of withdrawal fees. Your cumulative monthly trading volume determines the VIP level of your account. The maximum commission currently applied is 0.1% of the cryptocurrency traded as maker or taker. Keep in mind that users who pay in BNB will pay lower trading fees.
Conclusion
Transaction fees are an integral part of the cryptoeconomics of blockchain networks. They are part of the incentives given to users who ensure the operation of the network. Fees also provide a layer of protection against malicious behavior and spam.
However, the amount of traffic that some networks receive has caused fees to increase significantly. The decentralized nature of most blockchains makes them more difficult to scale. It is true that some networks have great scalability and high transaction throughput, but this is often linked to a sacrifice in terms of security or decentralization.
However, several researchers and developers are working on improvements that will hopefully bring more inclusion when it comes to cryptocurrencies in the developing world.
