Trading Guides


What are blockchain fees?

Blockchain fees are paid by users every time they send crypto or interact with a blockchain. They range in cost depending on the platform and congestion of a network

When sending cryptocurrencies from an exchange or a wallet users will often be charged a ‘blockchain fee’, which is also known as a ‘network fee’.

Simply, a blockchain fee determines the relative cost of sending a transaction to a respective blockchain and then on to its intended destination.

Transaction fees will then either get distributed to a miner that has mined that specific block, or in some cases it will be burned depending on the blockchain.

On Ethereum for example, the recent London Fork aims to make the token deflationary by burning tokens spent when making transactions. This reduces supply. So far, more than one million Ethereum tokens have been burned.

Transaction fees act differently on Bitcoin, as no tokens are ever burned. One Bitcoin block is mined roughly every 30 minutes. When a block is mined, the successful miner will be rewarded a bounty of 6.25 BTC as well as all transaction fees that successfully went out during that block.

During periods of high volatility, the blockchain ledger becomes congested. This means that the cost of transactions go up as users are forced to pay more to end up at the front of the queue.

Typically, a Bitcoin transaction costs in the region of $2.50 to $10, however, when the network becomes congested with pending transactions, it has been known to spike to as high as $50 per transaction.

This is still relatively low compared to other blockchains like Ethereum where users have been known to pay hundreds if not thousands of dollars to send a simple transaction.

As the industry continues to develop, more blockchain ecosystems like Solana, Tron, Cardano and Fantom get released.

These newer blockchains boast much cheaper fees and a higher amount of transactions per second, although concerns have been raised over the centralised nature of these blockchains compared to the likes of Bitcoin and Ethereum.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.