Digital currency that transfers money peer to peer And Decentralized has made it possible, it has been accepted by many people. However, if the digital currency is decentralized, who will receive the transaction fees? People who help add your transactions to the blockchain. In the continuation of this article, we will talk about how it works and how to reduce costs from Erztodi Academy.
What are transaction fees?
The blockchain network consists of a series of blocks, each of which contains verified transactions. In blockchain, to send a digital currency, a fee is charged to the sender. This charge is mandatory and has two important functions:
- Fees help miners and lenders run the blockchain payment system and secure transactions. When processing payments, miners prioritize those with the best volume-to-fee ratio in order to maximize their profits.
- Fees help with security as well as protecting the network from spam. In addition, it acts as a defense mechanism against hackers who try to attack the network by performing multiple activities at the same time. Paying fees deters attackers; Because it is expensive for them to execute hundreds of thousands of transactions at a high price.
Fees also govern how cryptocurrency transactions are processed. The higher the fee, the faster the transfer will be approved and executed.
Transaction performance
The transfer of digital currency is done online and before the transfer, Validity of the transaction approved. If everything goes according to plan, the transaction is sent to the waiting room. Since the block size is limited to 1 MB, the miner adds it to the initial block, which can hold approximately 2,500 transactions. When activity and traffic on the network increases, a long queue of transactions is created, which makes payments take longer. Transactions are prioritized by miners, who process payments with the highest fees first. They then confirm the transaction and place it in the block that was mined.
Transaction speed It depends on the miner or validator. Their algorithm is based on the fact that the amount of money (fee) offered by the sender to make the payment is the priority parameter for confirming transactions.
Solutions to reduce transaction fees
1- Wait until the network congestion decreases.
Since the state of the blockchain is constantly changing, transaction fees can fluctuate throughout the day swing be; By monitoring such fluctuations, you can determine the best time to trade with a fair commission.
Mampul (mempool), where they are waiting for miners, contains transactions that have been confirmed but not yet completed and are not contained in block transactions. If there are more of these transactions, you will undoubtedly have to wait longer.
Unlike normal queues, the transactions of those who paid the highest fees are processed first, not those who entered earlier. As long as transactions cost more, a transaction may remain in it forever.
A block of Bitcoin transactions can contain 2000 to 3000 transactions. If the current mempool volume (which you can check in your wallet or on the relevant websites) does not exceed this indicator, your transaction will be completed immediately. In this case, you can either wait or increase the transaction fee. Blockchain transaction fees can be customized. You can usually find the minimum and maximum fees in a cryptocurrency wallet.
2- Reduce the number of inputs and outputs.
With today’s digital currency wallets, you can move money between your accounts instantly and without fees, just like banks. You can transfer all the money you have received from hundreds of different accounts to your wallet and then convert it all into one coin. Instead of having hundreds of entries, you will have only one entry, resulting in significantly less trading volume.
Also, don’t convert your cryptocurrencies to fiat if the market goes down. Fiat transactions are subject to much higher fees. Stablecoins can be used as an alternative because buying digital currency drastically reduces transaction costs.
Another smart way to explore cryptocurrencies is with lower network fees. For example, some cryptocurrency transactions do not charge any fees. XNOEOS, IOTA and TRON are notable examples of fee-free cryptocurrencies.
last word
As you can see, it can reduce the transaction fee in many smart ways. If you use digital currency correctly.
Note: Please note that this text is written solely for your guidance and familiarity, and Aruz Todi Digital Currency Academy is not responsible for its decisions or financial consequences for people.
How to avoid paying high gas costs? First time in today’s currency. appeared.
Source
