Understand the costs in cryptocurrency transactions
Cryptocurrencies, such as Bitcoin and Ethereum, have revolutionized the way we think of money and financial transactions. However, one of the important drawbacks of the use of cryptocurrencies is the high cost associated with converting them into traditional fiduciary currencies or exchanging them for other cryptocurrencies.
One of the main reasons why cryptocurrencies are expensive are due to transaction costs. These costs can be taken by cryptocurrency exchanges, portfolios and payment processors that facilitate these transactions. In this article, we will immerse ourselves in the world of cryptocurrency costs, exploring what they are, why they exist, how they affect users and, above all, providing you with a step-by-step guide to the management of your cryptography funds to minimize transaction costs.
What are the transaction costs?
Transaction costs are the costs associated with sending or receiving cryptocurrencies. These costs can range from 0% to several percent of the amount of the transaction. The costs are generally billed by cryptocurrency exchanges, portfolios and payment processors to cover the cost of processing transactions.
Here is a ventilation of the functioning of the costs:
* Exchange costs : When you send cryptocurrencies from your Exchange account to another user’s portfolio, exchange fees are deducted from the amount of the transaction.
* Wallet fees : Some portfolios invoice a small sum for the reception or sending of cryptocurrencies, while others may not charge costs at all. However, these costs are generally minimal and have no significant impact on the overall cost of transactions.
* Payment processor costs
: When you use a payment processor to convert your cryptocurrency into a fiduciary currency, a small percentage of the amount of the transaction is billed by the processor.
Why do cryptocurrency costs exist?
The main reason why cryptocurrencies exist is due to their rarity. Unlike traditional currencies, which are created and printed at will, cryptocurrencies have a limited offer. This rarity increases demand, causing an increase in prices. To encourage users to participate in the network, cryptocurrency exchanges and portfolios have transaction costs.
Types of transaction costs
There are two main types of transaction costs:
* Transaction costs : costs are billed by the sender for sending a cryptocurrency.
* Transfer costs : costs can be billed when the cryptocurrencies are transferred from one portfolio account to another.
Manage your crypto funds: Tips and tips
To minimize transaction costs, follow these best practices:
- Use multi-signating portfolios : Multi-Signature Portfolios force users to check the identity of the sender before allowing them to send funds.
- Activate the low articulation options : Some cryptocurrency exchanges offer low-frequency options for specific cryptocurrencies.
- The transfer funds in small quantities : the transfer of small quantities of cryptocurrency is often cheaper than the transfer of a large quantity.
- Use a high frequency trading platform : platforms like Bitfinex and Binance offer high-frequency trading options, which can reduce costs by distributing transactions on several exchanges.
- Consider using a guardian portfolio : kept portfolios are generally more expensive but offer additional security features.
Conclusion
Cryptocurrency fees have become a significant drawback of the use of these digital currencies. However, by understanding the different types of costs and their operation, you can take measures to minimize their impact on your transactions. By following best practices such as the use of multi-signating portfolios and the transfer of funds in small quantities, you can considerably reduce your transaction costs.
Additional resources:
* Coinbase : an exchange of popular cryptocurrency with low stop options for many cryptocurrencies.