Cryptocurrency increase and hidden trade cost: understanding of gas fees
Cryptocurrencies have revolutionized the way of thinking about money, security and online transactions. From Bitcoin to Ethereum, these digital currencies attracted the attention of investors, entrepreneurs and everyday users around the world. However, one aspect, which has gained significant attention in recent years, is the key element of the cryptocurrency ecosystem: gas fees.
Gas fees are fees charged by blockchain for each transaction, regardless of whether it is an outgoing or incoming payment. They serve as a fee for miners to confirm the transaction and verify the integrity of the network. While the cryptocurrency concept may seem intuitive at first glance, understanding how gas fees work, it is necessary for traders who plan to participate in this digital space.
What are gas fees?
Gas fees are usually denominated in the units of the native token of a specific cryptocurrency, such as Ether (ETH) or Bitcoin (BTC). The fee is calculated based on the complexity of transactions, including factors such as the size of the block, network overload and the number of transactions involved. To give you an idea of how significant gas fees can be:
- In 2017, a single transaction with the participation of two Bitcoin transactions and one Ethereum transaction cost about $ 6 million.
- The average gas fee for bitcoins in 2020 was about USD 2-3 per block, which is more or less equivalent to the annual GDP of countries such as Greece or Ireland.
Factors affecting gas fees
Several factors contribute to the rising costs of trade on cryptocurrency exchange. Some of these factors include:
- Block size : The size of each block determines how many transactions can be processed at the same time. With the increase in the size of the blocks, the fees are growing.
- Network overload : When more users are trying to send or receive funds at the same time, they charge the network, which leads to higher gas fees.
- Simple transactions with several inputs and outputs are usually cheaper than complex.
- Block time : Time between block creation and verification affects the frequency of transactions. Faster blocks of flats cause higher gas fees.
consequences for traders
Gas fees can have a significant impact on traders, especially those who are new in cryptocurrency markets or have no experience in decentralized exchanges (DEX). Here are some of the ways in which you can affect cryptocurrency exchange:
- Reduced commercial volumes
: High gas fees may discourage users from participating in the market, which leads to a reduction in trade volume.
- Increased transaction costs : In the case of traders who have limited budgets, high gas fees can add up quickly, which makes the transaction more difficult.
- Higher general fees : gas fees are only one aspect of the total replacement fee structure. Other fees, such as withdrawal fees and trade fees, may also apply.
limiting the impact of gas fees
While gas fees remain a serious problem for traders in cryptocurrency markets, there are ways to alleviate their influence:
۱.
۲.
۳.
۴.
