While trading on PCEX Member or any other exchange you might have learned or incurred transaction fee on spot or futures markets trading. Exchanges often compete on the basis of transaction fees and reduce them to attract more investors? Wondered what transaction fee is, what exchange does with its collection, and what if it doesn’t take the transaction fee? We have answers to these and many more queries on the transaction fee.
Getting started: What is the crypto transaction fee?
The concept of transaction fee in cryptocurrency trading is no different than the transaction fee that you pay when shopping online. Generally, a transaction fee is applicable whenever the transfer of value takes place from one wallet to another. Therefore, it’s an essential condition for buying and selling cryptocurrency on any exchange, or its checkout process.
What do exchanges do with the transaction fee?
Miners and validators active on a blockchain deserve to get compensated as we all for whatever things we do to earn a livelihood. Besides, some investment also goes into the underlying blockchain or similar DeFi platform to make sure that the transaction happens in a frictionless manner and the same is broadcast, validated, and confirmed on a real-time basis.
The transaction fees are used to compensate people and the technology investment. It’s also used to incentivize and motivate miners and validators and keep the crypto trading on. The amount of effort required on a blockchain depends upon the number and the total amount of transactions happening.
The above image plots a graph with transactions per second over time for BTC. The notable growth in the number of crypto transactions from the image doesn’t need an introduction. The year 2021 has started on a good note. At USD48, 000 and plus BTC has witnessed its historic price rise in January 2021 since its inception.
For a cryptocurrency like BTC, the transaction frequency would be higher than the LTC, and so on. A user who wants their payment to be confirmed urgently can choose to pay a higher fee so miners are incentivized to put their transaction at the front of the queue. It may also vary by the wallet traders use to buy or sell the cryptocurrency. PCEX Member has one of the lowest transaction fees in the cryptocurrency industry. You pay only 0.3% for trading either with its spot and derivatives markets.
How Do transaction fees compare on blockchain networks?
The fee as we saw depends upon the frequency of transaction. In general, blockchain handling a higher number of transactions per second, charge a lower fee. The higher frequency also signals a higher market capitalization, but a lower transaction fee. Frequency is a dynamic value, and it varies by different economic and regulatory events. Besides Bitcoin and Ethereum, other cryptos using blockchain are Litecoin, Bitcoin Cash, Cardano, and Ethereum Classic. They have much lower fees of below one cent on average. The fees on Tron and Ripple remain lower.
Top cryptocurrency by value and transaction fee
#1. Bitcoin (BTC)
Transaction Fee: Average 3.46767% | median, 2.59552%
#2. Bitcoin Cash (BCH)
Transaction Fee: Average 0.00707% | median, 0.00444%
#3. Ether (ETH)
Transaction Fee: Average 6.25898%| median 5.36576%
#4. Litecoin (LTC)
Transaction Fee: Average 0.08988% | median 0.02017%
#5. Doge Coin (DOGE)
Transaction Fee: Average 0.19759%| median 0.11880%
However, exchanges try to keep it constant to retain investors. They manipulate the transaction fee by contributing to the remuneration that goes to the miners and validators, and investment for the platform. Investors often make it a point to invest with the exchange that has the lowest transaction fee.