The ability to send cryptocurrency to another party – regardless of who they are or where they live – is a power to cherish. Dispatching digital assets without having to involve an intermediary takes a matter of seconds and makes a mockery of the interbank charges users must accept when sending fiat currency internationally.
That said, it’s good to be mindful of the network fees that each cryptocurrency transaction (tx) entails. Sending crypto is cheaper than many traditional payment methods, but it’s certainly not free – and on occasions can be downright expensive.
In this short guide, we’ll help you better understand the blockchain fee process, so you’re able to work out what sort of fees you’re likely to pay whenever you send the two most popular cryptocurrencies, bitcoin (BTC) and ether (ETH).
If you’re new to the cryptosphere, you might be wondering: what on earth are network fees? After all, there’s no bank in blockchain. So, who sets the rates and who’s profiting?
In short, network fees are broadly synonymous with transaction fees, and they are paid to cryptocurrency miners as a reward for adding transactions to the public ledger. Network fees must be paid for all transactions to ensure they get validated, and fees represent the fuel that keeps the gear wheels turning.
Of course, not all transactions are alike: miners are financially incentivised to prioritise the confirmation of tx that carry a higher fee. As for the fees themselves, they depend on various factors such as network activity (since a finite number of transactions can be included in any block) and the data size of the transaction, with users free to choose between low, medium or high transaction speeds. Naturally, the faster the transaction speed, the higher the fee.
So, you want to send bitcoin or ether to another wallet and you’re keen to know the network fee. How can you find out?
Well, if you’re using the Zumo app, you don’t have to calculate: Zumo will do it for you. When you send funds, you can check the estimated network fee on the transaction confirmation screen before you initiate the transfer: the amount will be shown in crypto (0.000014 BTC, for example) and fiat (£0.11). At this stage, you can either cancel or confirm.
But what if you want to know in advance the sort of fee you can be expected to pay? As mentioned, the price depends on factors such as network conditions, data size, transaction speed and, of course, the asset itself: sending ETH, for example, is generally cheaper than sending BTC since the latter has a higher mining cost.
In the case of ETH, users can visit gasnow.org to get a real-time indication of gas price, denominated in gwei, aka nanoeth, a unit equal to one billionth of an ether. The website will show the gwei amount associated with slow (>10 minutes), standard (3 minutes), fast (1 minute) and rapid (15 seconds) transaction speeds. As with the Zumo wallet, you also get to see the price in fiat (in this case, US dollars).
What about Bitcoin network fees? Thankfully, there are a few online calculators available. privacypros.io, for example, provides the network fees associated with having your transaction mined within three blocks (30 minutes) or six blocks (1 hour), as well as within the next block (10 minutes). The site also provides a chart showing the historic daily average bitcoin transaction fees, denominated in satoshis per byte.
Remember, with the Bitcoin blockchain, blocks are designed in such a way that each one must be less than, or equal to, 1MB (1,000,000 bytes): on average, a block is mined every 10 minutes.
If you want to avoid paying high network fees, and get transactions confirmed more quickly, it makes sense to stick to off-peak times, when the network isn’t labouring under insane congestion. Of course, sometimes – as in a rampant bull market – this is easier said than done.
Research shows that the Ethereum blockchain is busiest from 1pm UTC to about 6pm UTC, roughly correlating with the early US trading hours between 8am EST and 1pm EST and dovetailing with European working hours. Generally speaking, network fees tend to be lower on Sundays.
As for Bitcoin, txstreet.com is a handy resource for appraising tx and mempool data, enabling you to determine the best time to send a transaction. The mempool, for the uninitiated, is where all transactions wait to be confirmed by the Bitcoin network. Generally speaking, as with Ethereum, the network is less congested over the weekend, giving transactions more space to clear.
Ultimately, timing is everything. Time your transaction just right and you’ll be able to send ETH and BTC for a reasonable network rate.