What's The Economy Of Cryptocurrency Transaction Fee

Transactions fees is a term used in cryptocurrencies and blockchain related transactions, it's the cost of making transactions on a blockchain network that's what transactions fee is all about, it's just in our traditional setting the banking system usually charges a fee for each transaction carried out by the user a small amount that looks really insignificant, the only thing is that most cryptocurrencies transaction fees are very minimal compared to what is being charged by this traditional banks on their users.

This fee is mostly paid to miners is like their payment or reward or stuff like that for the role the play in nodes validation so that transactions fee is like their own lot or gain, today I will like to discuss or break down the economy of cryptocurrencies transactions fees for those who might not know.

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The Economy Behind Cryptocurrency Transaction Fee

For one, transactions fee is not really fixed and they are several factors that might contribute to how much transaction fee is charged in a blockchain transaction which includes things like if the network is free as in a congested network transaction fees are usually higher than usual and if it's a high priority transaction or if the transactions is huge in size all this is what really determine the transaction fees in a blockchain transaction that's the the economy of cryptocurrencies transaction fee.

When much people are doing transactions in a particular blockchain it might lead to traffic or congestion which often lead to increasing transaction fees in an attempt to reduce the number of network users as some maybe scared of from performing the operation due to high transaction fee but when there is a reduced number or small number of people doing transactions on the network the transaction fees tend to be considerably lower.

Also another economy or working behind this transaction fees is that in most consensus mechanism it's a way of rewarding the blockchain validators that's those who validate and confirm transactions as well as miners these fee that's the transaction fees is the payment for this miners and blockchain validators as a form of reward for what they do or contribution to the blockchain network usually common in proof of work and proof of stake consensus mechanism.

Transactions fees may also depend on the blockchain crypto asset per say, most cryptocurrencies their transaction fees on the network is constantly changing due to any of the reasons I had mentioned earlier whilst there are some crypto asset which tend to have a predetermined transaction fee. Most times when a network has this insane transaction fee it often makes people run away from it like the ethereum network for instance which always has a transaction fee this makes it unreasonable for people carrying small transactions to want to do it on the chain, paying huge sums for small transaction size is bizzare and thus this will no doubt impact the adoption of this kind of blockchain.

The transaction fees on a blockchain is also determine by the instability in cryptocurrencies market, cryptocurrencies are highly speculative and volatile market and are subject to sudden price changes and movement which makes it unstable and this also impact the transaction fee as higher price of an asset may mean more cost and lesser the price of the asset the lower the transaction fees to be paid. So generally this is the economy of the cryptocurrencies transactions fees

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Conclusion

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Ofcourse I feel we all should probably look for a blockchain that suits our needs the most and if we have issues with high cost of transaction then we can look into chains that offer minimal transaction fees like the trx blockchain for instance whilst still ensuring efficiency and we should try to minimize or avoid a network when they are congested if we can so as not to have to pay high transaction fees.