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Transaction fees

Any transaction involving the transfer of cryptocurrency will incur fees, whether you are purchasing or withdrawing funds from an exchange or sending or receiving payments in cryptocurrency. Various fee types include:

  1. Transaction or miner fees: these vary depending on how many transactions are awaiting their inclusion in the current block and are intended to motivate miners and validators to validate cryptocurrency transactions.

  2. Service or network fees: these are applied by third-party providers that enable transactions (e.g. cryptocurrency exchange). These fees are made in addition to any network-generated fee paid to miners.

Transaction fees serve two crucial functions:

  1. Compensate miners or validators assisting and confirming the transactions.

  2. Defend the network against spam assaults: this is because transaction fees lead to a decrease in spam on the network, and large-scale spam assaults become more expensive and more difficult to execute.

    Transaction fees thus serve as a basic but efficient spam filter.

Transaction fees are generally affordable for most blockchains, but they can become fairly expensive depending on network activity. Transaction fees might be modest or substantial. The fees you pay might also be influenced by market forces. It is important to highlight that the amount of fees you pay impacts your transaction's priority for inclusion in the following validated block. In fact, users who wish to execute their transaction more quickly can even increase the transaction cost to enhance the likelihood that their transaction will be added to the following block of transactions on the blockchain.

The confirmation procedure moves along more quickly the more money that is spent.

Miners, which are in charge of adding transactions to the blockchain to finish them, are required for confirming and securing these transactions on each network. These payments make the effort of miners and validators profitable. Despite the fact that each blockchain is distinct, they all have a limited quantity of transactions that may fit into a single block (e.g. the Bitcoin network only permits a total of 2,800 transactions per block). Depending on how many transactions are awaiting their inclusion, miner fees may change. During periods of high network traffic, miners prioritize the validation of new transactions based on the fee paid by the user. Hence, the user who wants to complete the transaction more quickly can even increase the transaction fee to boost its chances of being included in the next completed block.

There are several options available for reducing fees. First of all, you may lower these fees by deciding when you want to complete your transaction. Due to the fact that the majority of cryptocurrency users worldwide are concentrated in the U. S., blockchain networks typically see the highest levels of activity during times when people there are awake. Additionally, traffic is lower during the weekends, particularly on Saturdays. Additionally, as was already said, the fees you pay depend on how quickly you want your transaction to be validated. If you have a high priority transaction and want it to be confirmed faster, you should expect a higher miner fee. If your transaction is not urgent, then a slower verification time means a lower transaction fee.

On the Ethereum network, transaction fees are referred to as gas. The gas cost accounts for the amount of processing power required to complete a transaction. The native currency of the network, ether (i.e. ETH), is used to monitor the fluctuating price of gas. Like other blockchains, the gas costs can go up or down, and miners are more likely to give your transaction priority if you pay more for gas. The gas limit here specifies the maximum price to be paid for a specific transaction and it should also be taken into account when proceeding with a transaction.

The cost of an Ethereum transaction or smart contract execution is determined by the relationship between these two and the gas limit. In fact, gas costs are anticipated to drop as Ethereum moves closer to a Proof-of-Stake mechanism. The network will require less processing power to validate transactions, resulting in a reduction in the amount of gas required to confirm transactions. Although validators prefer higher-paying transactions, network traffic might still have an impact on transaction costs. Visit the following link for further details about Ethereum 2.0 and the Serenity upgrade:

What is Casper, the Latest Ethereum Upgrade?

On the Fetch.ai network, the gas mechanism is made simple and gives you an option to pick high, medium, or low fees, in addition to allowing you to manually set the amount you wish to pay. Fetch.ai does operate some of the validators on the network, which further gives it influence over the gas fee levels. Even though some constraints are set by Fetch.ai on gas fees, the decentralized nature of the network guarantees that transaction fees are not set by any central authority, and the actual level of gas is set by each of the validators on the Fetch network. Fetch.ai has the philosophy that having high gas fees does no good for anyone, and because of this, the Fetch team wants to encourage everyone to use the network, and trade and transact using $FET tokens.

Low fees encourages higher network traffic, and this in turn means more transactions and activity and therefore more fees being paid in general. However, $FET that are traded and transferred on other networks are subject to the gas fees that those networks charge and Fetch has no control whatsoever over those fees. The fees gathered on the Fetch network are then distributed among the stakeholders (i.e. validators and community stakeholders). Gas fees on the Fetch network are very very low when compared to other networks. As a general comparison, Juno Network, another ecosystem blockchain within the Cosmos ecosystem has fees that on average are $0.05 USD per transfer, whereas Fetch.ai transfers cost $0.000000000000001 USD at the present time.

These gas fees are calculated in an extremely fair way, with the fee being directly proportional to the computing power needed to complete the process. So, for instance, a simple purchase transaction takes less computing power than activating a smart contract, therefore the associated fee will be lower.

There is full transparency too, as it is always clear what the gas fee will be before making a transaction, and so there are no hidden surprises.