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Debunking the Myth of Skyrocketing Transaction Fees

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Purpose of fees:
Originally implemented to prevent spamming of the network, which slows down the network and prevents “legitimate” transactions from being processed. They help to screen out bad actors by making it expensive for them to attack the network.
AND In addition to miners being rewarded with freshly minted new coins, miners are also rewarded with the value of the transaction fees for all transactions that were included in the block that they successfully mined.

How are transaction fees determined? Hello free market forces: Because there is limited space for each block of a blockchain, and the miners are incentivized to include transactions that paid higher fees, this can cause the price of transactions fees to increase, particularly when that blockchain sees an influx of transaction activity from people who are willing to pay higher and higher fees to have their transaction processed.

There’s this kind of myth going around that the more you pay in fees, the faster your transaction will be confirmed. This is kind of true but only to a certain extent. At a certain point, no matter how much you pay, the confirmation will only come as soon as the next block is mined. If your transaction as the highest fee attached to it, it will essentially be first in line for that next block.

BUT keep in mind that most transactions aren’t considered legitimate until a certain number of block confirmations. Block confirmations refers to the number of blocks mined after the block that your transaction was in. You can think of block confirmations as the level to which your transaction is locked in the blockchain, this is where that immutability comes into play. The more block confirmations means the less likely you’ll be able to undo that transaction.
That high transaction fee you just paid, only helps you get included in the first block quickly, it doesn’t speed up the preceding block confirmations that are often required. For Bitcoin, it’s common to see anywhere from 2-6 block confirmations to be deemed secure. With Ethereum, it’s more like 12-18 block confirmations. The time it takes for block confirmations is directly tied to the time it takes for a new block to be created. For Bitcoin it’s 10 minutes, so that’s 10 minutes for each additional block confirmation. Ethereum takes about 15 seconds for each additional block confirmation.
Wallets that let you set custom fees:, (In addition to full node wallets like Bitcoin Care, and for Ethereum: Geth/Mist/Parity)Bitcoin: Ledger, Trezor
Electrum
Wasabi

ETH: Ledger, TrezorMyCrypto/MyEtherWallet
BTC Mempool/Fees: https://mempool.space/
ETH Mempool: https://etherscan.io/txsPending?&m=&p=1 ETH Gas Tracker: https://etherscan.io/gastracker

Tools to help you gauge what to expect to pay in fees:Mempool first of all shows how many transactions are waiting to be processed and selected by a miner to be put in a block. The larger the mempool the more competition and usually means an increased transaction fee is needed to be processed in a timely manner.

here are some very helpful tools that tell you how much you can pay to make it go faster and make sure you’re not paying way too much for no reason.
This first one for Bitcoin, we’re looking at mempool.space. It give live updates and you can see how much people are paying in fees and the value of the transaction itself. Fees aren’t determined as a percentage of the value your trying to send, it’s determined by how much other people are willing to pay. This is how people can send millions of dollars worth of Bitcoin and only pay $0.50. Right now it looks like transaction fees are ranging from $0.47-$1.38. Right now, if you’re paying more than this in fees (from a wallet that allows you to set a custom transaction fee), you’re overpaying for no reason.

Now looking at Ethereum, the average fees are from $0.20 (for 13minutes)- $0.43(for 30 seconds). When you use this sliding gauge, you’ll notice that at some point, it doesn’t matter how much you pay, it will only be processed so fast.
Category
Crypto 101

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