Cryptocurrencies are designed to trade across online networks, without the need for banks or government support. Many new investors are surprised, however, to learn there are costs to using digital cash, including unexpected fees. Below are some frequently asked questions.
Crypto fees are essentially processing fees built into the networks that maintain bitcoin and other cryptocurrencies. In addition, third-party services like exchanges, trading apps and ATMs charge their own fees.
The network fees are incentives for the people operating the computers that keep the network alive. The services fees are the way those groups make money.
Crypto networks are run on a voluntary basis. For most of them, anybody can download the software and operate as a node on the network. They don’t get specifically paid to do this, so some networks have built-in incentives. One is “mining” rewards—newly minted bitcoin or ether, for example. The other is fees. On the Ethereum network, these fees are called gas.
It varies. For the digital asset XRP, the average fees are a fraction of a penny. For cryptocurrency dogecoin, the average fees have ranged from 2 cents to about $2.50.
However, on the most heavily trafficked networks—Bitcoin and Ethereum—the way fees are designed means they can be quite expensive.
Because of that range, whether or not the fees are onerous depends mostly on the size of your transaction. If you are sending $1 million to a broker, for instance, paying $60 to have that transaction settled in about 10 minutes is negligible (paying $1.80 is even better). If you are buying a cup of coffee at Starbucks, paying $1.80 in fees for a $3 coffee is excessive. Paying $60 is insane.