Free of fees: what do you pay for using a crypto wallet
Little in this world is given free of charge – and the world of cryptocurrency wallets is not an exception: if you own tokens and a crypto wallet, you face different kinds of fees. The problem is sometimes to understand what you are paying exactly for and not to pay more than necessary. Here are some tips for you if you would like to know what kinds of fees exist when it comes to a crypto wallet, how big they can be and how you can minimize them.
The first thing you should remember in terms of fees – there is often a transaction fee. If you have ever done fiat bank transfers, you may be familiar with fees. Fees for a cryptocurrency transaction are similar to the bank fees in fact but differ in implementation. It is important to understand that this fee is calculated depending on which cryptocurrency is in question.
So we will give several examples of how a transaction fee can be calculated for different currencies and in what form it exists.
1. BTC & bitcoin-like blockchains
The cost of a transaction in the Bitcoin network depends on the number of addresses involved in it.
For example, you received 1 BTC from A, 2 BTC from B, 5 BTC from C, and then you sent all these BTC (8 pieces) to D – so that 4 addresses participate in this transaction.
The fee in Bitcoin network is formed in Satoshis/byte.
What are Satoshis? 1 BTC = 1000 mBTC = 100,000,000 Satoshis
Why bytes? Bitcoin transaction has its size:
- Each address from which funds are received weights ± 148 bytes.
- Each address to which funds are sent weights ± 34 bytes.
- Each transaction takes ± 10 bytes., regardless of the number of addresses that participate in it.
Once you have signed and sent a transaction to the Bitcoin network, it spreads very quickly throughout the entire network and enters the mempool – transaction queue. The first arrives the one who pays more money.
A money-saving tip:
Before transferring Bitcoins, always check the size of the mempool. If it is almost empty, your transactions, even with the lowest possible fee, will pass pretty quickly. It makes no sense to set a fee of 10 Satoshis/byte because even with 2 Satoshis/ byte your transaction will pass to the first block.
The https://bitcoinfees.earn.com service shows what fees Bitcoin users paid for their transactions lately and what is the smallest fee you can pay for your transaction to make it pass quickly.
2. Ethereum transactions
All transactions in the Ethereum blockchain are accompanied by fees. The size of these fees usually depends on the level of calculation of certain transactions. The fee for each transaction is essential to provide a reward for maintaining the network (mining and storage of blockchain data).
The unit of payment of the fee is GAS.
How much is a GAS fee? Users set the price by themselves, and it is called GAS PRICE. A user should specify the price in Gwei. That’s how much Gwei is: 1 ETH = 1 000 000 000 000 000 000 wei = 1 000 000 000 Gwei.
There is one more parameter in setting the fee – GAS LIMIT. It means how much you are ready to spend if a transaction is more complicated and requires a bigger fee.
Thus, the maximum transaction fee is calculated according to the following formula: GAS LIMIT * GAS PRICE.
If we talk about a simple translation of ETH – it costs 21,000 GAS.
If you set the price for 1 GAS = 20 Gwei, you will pay such a transfer fee: 21000 × 0.00000002 = 0.00042 ETH (0.12$)
Why should one pay more?
As a rule, the higher the price of gas is, the more reward the miner will receive for completing the transaction. The probability that the miner will select this particular transaction and it will pass faster is thus higher.
But if the Transaction queue is small, it makes no sense to pay 50 Gwei per GAS, as a transaction will pass pretty fast anyway.
3. Other blockchains
The other cryptocurrencies have other rules of paying fees. For example, there are no transaction fees needed when it comes to EOS. Here you pay for the creation of the wallet in the network, but you don’t have to pay anything for transactions. There is the so-called bandwidth, which is given to each user depending on the share in the EOS network that he/she owns.
So that you if you need to make more complex transactions – you can just purchase more EOS tokens.
Transaction fees for tokens
Whichever token you want to use, the fee for the transaction will be generated according to the rules of its blockchain. For example, transaction fees of ERC20 tokens or ERC721 tokens will be calculated in the same way, as for ETC coins.
Price of a wallet
Most crypto wallets are free today. The only wallets that user has to buy are hardware wallets. Prices can vary from $ 50 to $ 300. But it is, of course, a matter of your choice – to buy it or to give preference to free options, like web, desktop, or mobile wallets.
You should be also aware that there are still some custody wallets on the market that charge extra fees, adding to the necessary minimum of charges. If you’re not sure about the wallet you’re using – better check it before paying unnecessary fees. For us, in Guarda any extra charges are a big no-no.
Fees for exchanging coins and buying them with card
Each exchange platform sets the fees itself. Fees are often included in the exchange rate, so that the user, in fact, does not pay the fee separately and perceives it as part of the transaction. In some cases, the fee is paid in excess of the specified rate, which makes the financial transaction less profitable for the client – sometimes the fee can reach 15% per deal and even more.
Since the user does not set the fee on his/her own – the only way to save money is to look through various kinds of cryptocurrency exchanges and their terms to find a better deal.
A money-saving tip
To minimize the fee one can search for exchange platforms, which offer a discount for registration. Some of them have such a condition: the more money is exchanged, the more discount you get.
There are also exchanges that do require not a very big fee – like the ones we partner with at Guarda: basically, their fee is about 0.5% per deal. We do a meticulous selection of partners, choosing the best ones – still, we ask you to be attentive to the conditions they provide, as we’re not responsible for their commission politics. Guarda wallets, per se, don’t charge any additional commission.
When dealing with exchange platforms one should remember that there are exchanges that allow paying with a debit or credit card. However, the fee is often quite big – usually around 4-5%.
To sum up
There are different fees that lie in wait for a user of a cryptocurrency wallet: it often happens that you have to pay a transaction fee, an exchange fee or to give money for a hardware wallet. But there is often a loophole that helps you to save your money. One should be aware of the rules of the game not to overpay whether trying to make a transaction pass quickly or using an exchange.
Something you can be sure about – Guarda Wallet doesn’t charge you any commision. The only situations in which a user may have to pay are commissions set by our exchange partners or a blockchain commission for performing a transaction. We keep Guarda free and accessible to everyone.