Let’s go back to the purpose of invention of cryptocurrency. It was to overcome the issues of centralized payment transaction system. The banks and other financial services took much time in verification, transfer process and charged a hefty amount for carrying out the process safely.
In today’s fast and digital world, wasting so much time and money for international money transfers is not worth it. Just as email replaced letters and postcards, cryptocurrency was brought into picture to replace this traditional payment system. A point to be noted here is even for emails, you need to pay for the internet connection. So, in case of cryptocurrency, it cannot be free of cost. You got to pay the network fees.
If you are aware of how the transaction is carried out in case of cryptocurrency, you would easily understand the previous sentence. These digitized virtual currency work on a technology called “Blockchain”. When you initiate a transaction, it is added to the block with other transactions occurring at that time. There are specialized programmers called “miners” who solve a puzzle and then this block is added to the chain of blocks, hence the name blockchain. These miners earn reward in the from the crypto and other transaction fees. So, clearly crypto transfers cannot be done for free. You have to at least pay the network fees as charged by the miners. Because the miners also invest in specialized hardware, software and use a lot of electrical power for mining. The crypto reward is halved every four years, so the transaction fees will be increased. As miners will have to earn some profit.
Moving forward to cryptocurrency exchange, the easiest way to buy/sell and trade cryptos. As they provide you a platform with hefty features, transaction fees are charged in disguise of commission. Every exchange will have different rates and policies for trading fees. Exchanges like Bittrex and Binance have fixed trading fee and Binance also charges for withdrawal depending upon the amount of crypto to be withdrawn. Other exchanges like Bitfinex, Poloniex and Kraken have trading fee structure based on maker-taker model.
Most of the current exchanges have a profit gaining strategy behind trading and other miscellaneous fees. These are burning a hole in trader’s pocket. This is been conveyed by the traders themselves in a recent survey organized by Encrybit – an upcoming cryptocurrency exchange platform. In the survey, the traders were asked to mention the biggest issue faced while trading on current cryptocurrency and 37% said high trading fees is a chief hurdle faced while trading.
As per a data analysis by BitInfoCharts, the average fee paid for cryptocurrency transactions is $28. If you check Twitter, you can find a few traders’ tweets on paying high trading fees and some are as high as 40%. Crypto is here to cut the costs of middlemen. With the increasing nature of trading fees, gaining popularity of cryptocurrency trading seems to be in danger.
Thus, the potential crypto traders and investors are expecting an exchange with affordable trading fees.