In this article, we're covering what transaction fees are, and taking a look at which cryptocurrencies offer the lowest transaction fees.
While long-term traders are unlikely to get affected by transaction fees, short-term traders and people actively using cryptocurrencies are often plagued with excessive fee structures.
This complaint has led to layer 2 solutions, where transactions can most quickly and cost-effectively be executed, as well as new blockchain platforms entirely (as was the case when developers migrated away from Ethereum due to high transaction costs).
What are transaction fees?
Transaction fees are fees paid to the miner of the network to execute the transaction. While some networks differ in how they operate, transaction fees are consistent across the board. Looking at Bitcoin as an example, when a user sends BTC the transaction is entered into a pool of pending transactions known as a mempool.
The miner will then pick up a batch of transactions and validate them, checking to see whether the original wallet does in fact have the funds to send and if the wallet addresses are valid. Once the transaction is executed, the data relevant to the transaction is added to a block, which is added to the blockchain chronologically.
As compensation to the miner for their time and electricity, they earn a small crypto transaction fee from each transaction as well as a reward for adding the block, known as a miner's reward. This process also ensures the safety and integrity of the network.
When the networks are very busy, the cost of sending a transaction is increased. Users can then choose to add in a higher crypto transaction fee in order to prioritise their transaction in the mempool.
Transaction fees for smart contracts are based on how much electricity will be needed to complete the task. Typically, transaction fees on smart contracts are much higher.
Generally, the terms transaction fee and network fee can be used interchangeably. They both refer to the transaction fee necessary by the network for the transaction to get processed.
Exchange fees refer to something else entirely. Exchange fees are fees charged by the exchange in order to conduct the service. Be sure to check before conducting a transaction on an exchange as you might be required to pay a transaction fee (or network fees) as well as exchange fees.
How to pay less for transaction fees
A transaction fee is imperative to your transaction getting executed so it cannot be avoided entirely, however, there are ways to reduce the amount you need to pay.
Transaction fees increase when the network is busy, so sending your transaction while the network is quieter is a great way to reduce the transaction fee. Typically the busier periods are during business hours in the United States.
Look out for the Lightning Network for Bitcoin and layer-2 scaling solutions for Ethereum as these will provide a cost-effective solution to high transaction costs on those networks.
Which is the cheapest crypto to transfer?
Let's take a look at some of the most popular cryptocurrencies and the average transaction fee associated with their platforms.
XRP - $0.0002 per transaction
Developed by Ripple Labs, XRP is optimised for fast, affordable cross-border payments, with a focus on serving financial institutions and remittance providers. Thanks to its unique architecture, XRP has cemented its status as a key player in the payment processing space.
XRP's minimal costs and 4-second transaction times make it a preferred choice for users and institutions alike.
Solana (SOL) - $0.00025 per transaction
Solana’s transaction fees cost just fractions of a cent ($0.00025), with complex transactions also coming in incredibly cheap. The network stands out for its lightning-fast transactions, typically wrapping up in about 2.5 seconds. Thanks to its scalable design, Solana can handle many transactions simultaneously, making it a hit for dapps and big blockchain projects.
This efficiency, coupled with its rapid speed, has made Solana a favourite among both developers and users, and a permanent feature in the top 10 biggest cryptocurrencies based on market cap (currently number 5).
Litecoin (LCH) - $0.0025 per transaction
Litecoin stands out as one of the cheapest crypto options out there, costing around $0.0025 per transfer. As an early pioneer in the space, Litecoin was designed with fast, affordable payments in mind, borrowing and refining Bitcoin's underlying technology. Litecoin's speedy 2.5-minute transaction times add to this appeal.
The minimal fees on Litecoin are a huge plus, with its efficiency and speed making Litecoin an attractive choice for those seeking a cost-effective crypto.
Bitcoin Cash (BCH) - $0.01 per transaction
Bitcoin Cash makes it onto the list with an attractive $0.01 average transaction fee. As a Bitcoin offshoot, BCH was engineered for faster, more affordable transfers via larger block sizes.
The cost-effective fees on Bitcoin Cash have made BCH a viable option for those looking for a low-cost market entry and equally impressive low-cost transaction fees.
Dogecoin (DOGE) - $0.04 per transaction
Dogecoin, born in 2013 as a playful take on crypto, has surprisingly become a significant player in the crypto space. Despite its lighthearted meme-inspired origins, Dogecoin's enthusiastic community and celebrity endorsem*nts have propelled it into the mainstream.
Its low $0.04 average transaction fees and fast 1-minute transaction times make it practical for frequent micro-transactions like tipping and donations, blending fun and function.
Trade smart, trade with Tap
Users can trade all the tokens mentioned above with equally impressive low-cost exchange fees directly on the Tap app. Adding to the cost-effective nature of the platform, it also offers heightened security and added convenience. It's time to trade smarter, download the Tap app and get started today.
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