What is Blockchain transaction fee? How to calculate transaction fees on blockchain
What are blockchain transaction fees? Why do Blockchains need transaction fees? How to calculate Blockchain fees? Find out here!
When you make a transaction on the blockchain, you pay the associated transaction fee. Fees vary depending on the type of Cryptocurrency and network you use.
In this article we will learn what Blockchain transaction fees are and how to calculate transaction fees of popular blockchains in the market.
What are blockchain transaction fees?
A blockchain transaction fee is a fee charged to a user when performing a crypto transaction on the blockchain, normally the fee is collected in the project’s native token.
Transaction fees can be high or low, depending on network activity. Market forces can also affect the transaction fees you pay. While high fees may hinder widespread blockchain adoption, very low fees can raise safety and security concerns.
Why does Blockchain have to have transaction fees?
Since the advent of blockchain, transaction fees have always been an essential part of the discussion. You will see this fee when depositing, depositing or withdrawing cryptocurrencies.
Cryptocurrency transaction fees exist for two important reasons:
- First, fees reduce the amount of spam transactions on blockchain networks, as it makes large-scale spam attacks very expensive to perform.
- Second, transaction fees are important because they can be seen as the primary driver of users becoming transaction validators, as transaction fees are part of the reward for supporting a working blockchain network.
For most blockchains, transaction fees are pretty cheap, but they can be quite expensive depending on the network’s traffic.
How to calculate transaction fees on the popular blockchain
Bitcoin Transaction Fees
On the Bitcoin blockchain, miners receive transaction fees through transaction validation to generate a new block.
The collection of unconfirmed transactions is called a mempool (short for memory pool). Miners will prioritize transactions sending BTC from if users pay reasonable fees.
Some wallets allow users to set transaction fees manually. That is, users can also send BTC with zero fees, but miners will most likely ignore these transactions and they will not be validated.
Bitcoin transaction fees do not depend on the amount sent but on the transaction size (in bytes).
Imagine your transaction size is 400 bytes and the current average transaction fee is 80 satoshi per byte. In this case, you would have to pay around 32,000 satoshi (or 0.0032 BTC) to have a good chance of your transaction being added to the next block.
When network traffic is high and demand for sending BTC is high, the minimum transaction fee for quick validation is likely to increase as other bitcoin users are trying to do the same. This phenomenon can occur during periods of intense market volatility.
Therefore, high fees are one of the reasons why BTC is difficult to use for payment in daily activities. For example, you can’t buy a $3 cup of coffee because the transaction fee is too high for the coffee itself.
Ethereum transaction fees
Ethereum transaction fees are measured by the computing power required to process a transaction, it is called gas, market-driven gas because it is calculated in ETH, the network’s native token.
While the amount of gas required for a transaction rarely changes, 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.
Total gas fees can be understood as payments in exchange for needed computing power, plus fees to process transactions faster. However, you should also consider the gas limit to determine the maximum price to pay for a certain transaction or task on Ethereum.
Example: If a transaction costs 107,218 gas and gas price is 70,639167932 Gwei, the transaction fee will be 7,573,790 Gwei or 0.007573790 ETH ($25.56)
Learn more: What is Gas? Differentiate Gas Price & Gas Limit
Note, you need ETH in your wallet to pay the transaction fees, if you send tokens without ETH in your account, the network will notify you that you do not have the required transaction fees.
So make sure you are keeping some ETH in your wallet to pay the transaction fees. As Ethereum moves towards proof of stake (Proof of Stake) adoption, users can expect gas fees to drop.
Binance Smart Chain (BSC) Transaction Fees
Binance Smart Chain (BSC) is a blockchain built by Binance, BSC runs in parallel with Binance Chain (these two networks are separate). While BNB running on Binance Chain is a BEP-2 token, BNB on BSC is a BEP-20 token.
The BSC network uses a proof of authority consensus mechanism. Validators of the network need to staking BNB to become validators, and after successfully validating a block, they will also receive the transaction fees of the transactions in that block.
Binance Smart Chain allows the creation of smart contracts with more customization. In fact, BSC’s transaction fee system is similar to that of Ethereum. In it, transaction fees are calculated using the computing power required to execute transactions or execute smart contracts.
As mentioned, the BSC cost structure is very similar to the cost structure on Ethereum. Transaction fees are expressed in gwei, which is a small denomination of BNB – equivalent to 0.00000001 BNB. Users can set high gas prices to have their transactions prioritized when added to the block.
In the example below, the gas price is 10 Gwei. Note, the gas limit has been set to 622,732 Gwei, but the actual gas used is only 352,755 (52.31%) With the Gwei used in this transaction, the actual transaction fee is 0.00325755 BNB (range) $1).
So we learned what Blockchain transaction fees are and how popular blockchains like Ethereum & BSC are charged. If you have other questions related to the above topic, please comment below for Idolmeta.net to support right away!