{"id":491028,"date":"2022-09-07T18:19:26","date_gmt":"2022-09-07T15:19:26","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/"},"modified":"2022-09-07T18:19:26","modified_gmt":"2022-09-07T15:19:26","slug":"how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/","title":{"rendered":"# How high transaction fees are being tackled in the blockchain ecosystem"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a39e43880f64\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a39e43880f64\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/#%E2%80%9D_How_high_transaction_fees_are_being_tackled_in_the_blockchain_ecosystem_%E2%80%9C\" >&#8221; How high transaction fees are being tackled in the blockchain ecosystem &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/#What_are_transaction_fees\" >What are transaction fees?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/#Why_can_transaction_fees_get_very_expensive\" >Why can transaction fees get very expensive?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/#Current_solutions_to_high_transaction_fees\" >Current solutions to high transaction fees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/how-high-transaction-fees-are-being-tackled-in-the-blockchain-ecosystem\/#Different_ways_users_can_reduce_transaction_fees\" >Different ways users can reduce transaction fees<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_How_high_transaction_fees_are_being_tackled_in_the_blockchain_ecosystem_%E2%80%9C\"><\/span>&#8221; How high transaction fees are being tackled in the blockchain ecosystem &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDkvM2FhMTZjODgtY2I0NC00ZGNhLWIwZTEtMDZjZmQ4OWE0YjhhLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-71846793>High transaction fees have been a long recurring issue for users on popular blockchain networks like Ethereum and Bitcoin during periods of increased demand. However, there are protocols, platforms and methods that help users to reduce costs.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_are_transaction_fees\"><\/span>What are transaction fees?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Transaction fees are fees that users pay to send a transaction or interact with a smart contract on a blockchain network. While gas fees can refer to transaction fees on any blockchain, the term is mainly used to describe the Ethereum network transaction fees.<\/p>\n<p>Transaction fees are paid in small fractions of the network\u2019s native cryptocurrency. For example, with Bitcoin (BTC), users will pay in Satoshi\u2019s (very small fractions of BTC), and with Ether (ETH), they will pay in gwei.<\/p>\n<p>There are two main reasons users need to pay fees when sending a transaction. The first reason is to pay miners or validators (also known as nodes) for securing the network. Proof-of-work (PoW) blockchains have miners who validate transactions by using their computing power to solve complex algorithms. In contrast, proof-of-stake (PoS) blockchains have validators who stake their tokens to secure the network. <\/p>\n<p>In return for securing the network and ensuring that no fraudulent transactions are placed, these nodes are compensated with transaction fees on the blockchain. Network validators make it possible for the blockchain to operate in a decentralized manner without having to rely on centralized entities to ensure that no malicious activity takes place on the network. <\/p>\n<p>The second reason users pay transaction fees is to enable the operation of smart contracts. Smart contracts are programs that automatically execute once certain conditions have been met. For example, a smart contract may be programmed to release tokens or a nonfungible token (NFT) once they receive a payment or once a certain amount of time has passed. Just like users, smart contracts have to pay fees, too, since they\u2019re also sending out transactions. So, if a user wants to perform a certain function on a smart contract, they will pay the gas fees.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_can_transaction_fees_get_very_expensive\"><\/span>Why can transaction fees get very expensive?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Transaction fees are not static and they vary based on many variables. One of these variables is speed, meaning that transactions with higher fees get prioritized by nodes, reducing the time it takes for them to arrive. On the other hand, transactions with lower fees take longer to validate since nodes do not prioritize them.\u00a0<\/p>\n<p>Most mainstream platforms, for example, wallets and exchanges, preset the fee for a transaction at a medium level. However, users can change the fee, increasing the amount for urgent transactions and reducing the amount to save money while waiting longer for the transaction to complete.<\/p>\n<p>Supply and demand are the biggest factors in high transaction fees. Once a blockchain network has a high demand for transactions, costs naturally rise since the supply cannot keep up. This leads to nodes prioritizing transactions with higher fees, which leads to users increasing their transaction fees, which raises the bar higher. For example, imagine the average transaction fee is $3.00, but the network is congested. So, many users start setting their transaction fee at $10. Reasons can include a popular initial coin offering or NFT offering that people are trying to get into. <\/p>\n<p><strong><em>Recent: DeFi Regulations: Where US regulators should draw the line<\/em><\/strong><\/p>\n<p>However, the demand keeps growing, and even the $10 transactions take too long to complete. So, users start paying $15 for gas, then $25, $50 and so on. In addition, there could be a massive ecosystem of tools and products (i.e., additional NFT offerings, yield farming, lending, borrowing, <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> decentralized finance (DeFi) etc.), so demand for transactions has exploded across different sectors. Now, transaction fees are costing over $300, which was the case in May, with gas fees costing over $450 on Ethereum due to the Yuga Labs launch of their Otherside NFT collection.<\/p>\n<p>Ivo Georgiev, CEO of crypto wallet Ambire, told Cointelegraph, \u201cAs much as we all in Web3 like to challenge TradFi and expose its weaknesses, one should admit that there is no gas fees problem in TradFi. Fees for operations in traditional finance are negligible and people are used to not even care about them.\u201d<\/p>\n<p>Georgiev continued, \u201cNow imagine you get into Web3 and at busy times you have to pay a $30 fee for exchanging tokens worth $150. Given that in crypto interactions are made more often \u2014 add\/remove liquidity, move positions between protocols, bridge between layers \u2014 it is important that gas fees are low enough in order to onboard the next 1 billion users to crypto with lower friction.\u201d<\/p>\n<p>So, essentially, when there is high demand, users are willing to pay more to ensure their transactions get through. As transaction fees increase, other users pay more to outbid the previous users and ensure that their transactions are completed first. Over time this leads to a general increase in transaction fees on a blockchain network.<\/p>\n<p>Anthony Georgiades, co-founder of Pastel Network \u2014 an NFT and Web3 infrastructure and security project \u2014 told Cointelegraph:<\/p>\n<blockquote><p>\u201cLow gas fees are reflective of less congestion and lower \u2018network difficulty\u2019 on the blockchain, which allows users to engage in cheaper network transactions with an increased capacity for capital efficiency. Moreover, the cost of buying and listing crypto assets decreases with low gas fees.\u201d<\/p><\/blockquote>\n<p>Georgiades continued, \u201cHigh fees are also a major deterrent for new and existing users who don\u2019t want to spend exorbitant amounts on gas \u2014 sometimes equal to or more than the cost of their purchase. In order to ensure the space remains accessible and welcoming to users, it\u2019s important to keep gas fees low.\u201d\u00a0<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Current_solutions_to_high_transaction_fees\"><\/span>Current solutions to high transaction fees<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Different protocols have been developed in response to the high transaction costs experienced when a blockchain is congested. One of the most popular solutions is layer-2 platforms.\u00a0<\/p>\n<p>Layer-2 platforms operate on top of the main blockchain, or the layer 1, taking a portion of the transactions and validating them off-chain. By verifying transactions on a separate network, L2s reduce the strain on the main blockchain, preventing congestion and keeping fees low while keeping speeds high. L2 networks themselves have very low fees and fast speeds. The most popular L2 platform is the Lightning Network which helps to scale the Bitcoin blockchain. Polygon is another popular L2 for the Ethereum network.<\/p>\n<p>Another popular layer-2 solution is zero-knowledge Rollups (zk-Rollups)<\/p>\n<p>that work by taking batches of transactions off the main chain and rolling them into a single transaction. The single transaction is verified and a validity proof is sent back to the main chain. Zk-Rollups enable the Ethereum blockchain to have lower transaction fees, increased transaction capacity and faster transaction times due to the reduced strain on the network.<\/p>\n<p><strong><em>Recent:\u00a0Ripples of Bitcoin adoption at Biarritz\u2019s Surfin Bitcoin Conference in France<\/em><\/strong><\/p>\n<p>Protocols and wallets have also taken measures to reduce transaction fees for users. Ambire Wallet, for example, has a Gas Tank feature that enables users to reduce transaction fees by prepaying. This works using credits to pay the current gas fees, which will be used for future transactions. So, for example, if gas fees are currently low, a user could prepay a transaction using the current fees, enabling them to send the transaction at a later date with the prepaid rates. Users can also pay for gas fees using stablecoins like USD Coin (USDC) or Tether (USDT), which are less volatile than regular cryptocurrencies.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Different_ways_users_can_reduce_transaction_fees\"><\/span>Different ways users can reduce transaction fees<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There are different ways users can manually save on transaction fees. One way to reduce fees is by timing transactions for periods with lower activity or congestion on the network. For example, the Etherscan gas tracker shows the average gas fees on the Ethereum network as well as the highest and lowest values. Users can aim to send out transactions when the costs are at their lowest to take advantage of the reduced fees.<\/p>\n<p>Depending on the wallet or exchange, users can manually reduce the fees they pay for transactions. However, doing this can cause their transactions to be delayed due to the lower priority they will receive from nodes on the network. If users reduce fees too much, they could be waiting a long time before their transaction is validated. This <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roach is best taken during periods of high network activity and for non-urgent transactions. Timing transactions is a better alternative.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. 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However, there are protocols, platforms and methods that help users to reduce costs. What are transaction fees? Transaction&#8230;<\/p>\n","protected":false},"author":1,"featured_media":491029,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDkvM2FhMTZjODgtY2I0NC00ZGNhLWIwZTEtMDZjZmQ4OWE0YjhhLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,74891,74892,4965,71407],"class_list":["post-491028","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-ethereum","tag-tokens","tag-technology","tag-trading"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/491028","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=491028"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/491028\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/491029"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=491028"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=491028"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=491028"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}