A transaction fee is a charge for processing transactions on a blockchain or exchange, varying with network activity and providing incentives for miners.

Understanding Transaction Fees

Imagine you’re transferring money or making a purchase. A small charge for the service—this is the transaction fee. It’s the price for the convenience and security of the transaction.

What Are Transaction Fees?

Fixed Fees and Volume Discounts

Centralized exchanges might charge a standard fee for trades. They may offer discounts—more you trade, less you pay per transaction.

Transaction Fees in Traditional vs. Crypto Systems

Traditional systems like banks or services like PayPal also charge fees. For example, PayPal’s international transfer fee is 4%. A similar crypto transaction could be significantly cheaper, especially during times of low network traffic.

Why Do Transaction Fees Exist in Blockchains?

How Are Fees Determined?

On networks like Bitcoin, fees are not based on the amount transferred but the data size of the transaction. Miners pick from the mempool, usually starting with transactions offering higher fees.