Understanding Ethereum transaction costs: 20% normal?
As a second largest cryptocurrency of market capitalization after Bitcoin, Ethereum has become a popular choice for people who wish to create microtransactions and deal with suppliers. However, a question that surprised many users is why the average costs for the transaction on Ethereum are around 20%. In this article, we immerse ourselves in the reasons for these costs and examine what is considered normal.
What are the transaction costs?
Transaction costs are a small amount of cryptocurrency, which is calculated by the transaction processing network. They serve as encouragement for programmers to build and maintain the Ethereum network, which allows you to perform smart contracts and decentralized applications (DAPP). The costs are generally paid in the form of an ether (ETH), native cryptocurrency of the Ethereum network.
Why are the transaction costs raised?
The main reasons why the transaction costs on Ethereum are raised are as follows:
- Network Overload : With more than 200,000 active accounts, the Ethereum network can be crowded, which leads to an increase in treatment and higher costs.
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- gas price : gas is a transaction unit in the Ethereum network. As gas prices increase, as are transaction costs.
Do 20% of normal costs?
On the competitive market of cryptocurrencies today, 20% may seem relatively high compared to other platforms. However, it is necessary to examine the following factors:
- Transaction volume
: If you make frequent transactions, your costs may be higher due to the increase in network overload and demand for calculation resources.
- Network capacity : The Ethereum network has a limited capacity, which can cause higher costs when the network is fully used.
- Competition of the market : Other platforms, such as Binance Smart Chain (BSC) or the polygon, offer lower transaction costs compared to Ethereum.
To say, 20% is considered relatively high by many users. By way of comparison:
- On Bitcoin Cash (BCH), the popular Altcoin, the average transaction costs are approximately 1 to 2 cents.
- In Cardano (ADA), another blockchain platform, average transaction costs are much lower, about 0.01-0.05 ETH.
Application
Although 20% may seem relatively high in Ethereum, it is necessary to consider the capacity of the network and competition on the market when they decide whether these costs are justified for your needs. As the cryptocurrency landscape evolves, we can expect a reduction in costs when the network becomes more used.
For the moment, if you are a frequent micro-transactor or use Dapps Ethereum regularly, 20% can be useful. However, if you are a light user with rare transactions, you can find 1-2 cents for a more reasonable transaction. In the end, it is crucial to consider the costs and advantages of the use of Ethereum before drawing conclusions.
References:
- Coindesk.com: “Ethereum transaction costs will increase as the highest costs of $ 5,000 in certain regions”
- Cointelegraph.com: “Why the costs for the Ethereum transaction reach recording?”
- Ethereum.org: “Understanding Ethereum transaction costs”
