Know About Fees Levied By Online Exchanges For Bitcoin Transactions

Being the most popular cryptocurrency, people tend to invest in Bitcoin. Also, since it's the oldest crypto coin, it commands more credibility in the volatile industry than those which came later. There are mainly two ways in which Bitcoin trading is done. One is through “mining” and the other by purchasing Bitcoins from an online exchange. Mining is a complex job involving deep familiarity with the technology and the skill set to solve complex mathematical equations. But trading it through an exchange is less cumbersome. However, a user is required to pay some fees to be able to trade via an exchange.

Transaction fee

All exchanges charge this fee, their primary source of income for facilitating a buy or sell transaction. Most of the exchanges follow a fixed fee model, that is they charge a predetermined amount for facilitating each transaction. Still, the final commission paid to an exchange may vary depending on the volume of transaction and other exchange-specific factors. Bitcoin investors should do research about different exchanges and pick the one that suits their interest best.

Another model some exchanges follow is the Maker-Taker model. This is a variable fee model in which the seller is the maker and the buyer is the taker. The transaction fee depends on the amount traded and the trading frequency of a user. For example, if you are an active trader, you could qualify as a maker and pay a reduced transaction fee.

Wallet fee

Exchanges allow users to create their own digital wallets to keep the cryptocurrency safe. Most wallets don't charge a fee for storing the coins but withdrawing or depositing coins may invite a charge.

Network fee

The network fee is used to pay miners for verifying transactions so that they can be added to the blockchain (or the decentralised ledger) and the process is complete. Miners are an important part of the transaction process and they invest in powerful computers to do their job. They ensure the transparency and legitimacy of transactions. The cryptocurrency exchange has no direct control over network fees, which follows the concept of demand and supply. If the transaction is high, this fee will increase.