Some newcomers are amazed at high commissions
I sent $ 40 in Bitcoins.
$ 25 sent
16 $ commission
41 $ total
40% commission of the total cost of the transfer. Incredible!
Are you ready to send your first transaction to Bitcoin? From you $ 16 ...
Of course, such huge commissions in relation to the amount of transfer - this is probably the most unfortunate example in the modern network, there are better examples.
But, if you are a beginner, such a figure can be a shock to you. Despite the fact that Biktoin is "the money of the future", their high cost and experimental character can scare off newcomers. At least, if you understand the nature of such high commissions, you better understand the technology itself, its weaknesses and possible ways of improvement.
You are probably asking yourself - who leaves this money, who is this millionaire? The fact is that they do not go to one particular place.
So, what is a commission for a transaction?
When you send a transaction in the crypto currency, you pay for its inclusion in the protocol chain, which you can consider as the official confirmed record of every token on the network in the whole history (be it Bitcoin, Ether or something more exotic). And this protocol (the book of all recorded transactions) is not stored in one place, as in a bank. It is distributed among all nodes of the network.
This means that if any computer (or a group of computers) fails and disconnects from the network, there will still be a record on other devices confirming that you own your asset. The bad news is that you have to pay for the service of all these computers.
It's time, probably, to acquaint you with the miner.
Hello, we are miners! Miners, in our opinion
You do not need to know how it looks and where it is, and in general it is this or that. All you need to know is that the miners perform a certain, cost-effective work, allocating the power of their computer for it. Their efforts help maintain the network in a stable state, but they also help the network determine which transaction should be included in the block.
For all their efforts, they are rewarded with some of the tokens they have extracted.
But why is it so expensive?
Let's try to figure it out.
Each crypto-currency transaction consists of small components of information and data, and practically any Blockchain network provides a limited space in one block for this data (for all transactions, the owners of which currently want to make transfers). This means that you pay, because you are interested in making your transaction in the first place, here and now, and after it was kept in history forever.
Now do you understand? The higher the commission fee for the transaction that you offer to the miners, the higher the chances of your transaction to be included in the next block, which is processed by the miners.
The block size limitation for different networks varies (for example, in Blockchain Bitcoin the block limit is 1MB), it can also vary. But in general, developers do not advise uselessly to increase the block size, as this can lead to network instability and technical problems.
Until recently, most network users did not even notice these limits and restrictions, as the networks easily coped with the load. But now in the world there is a real crypto-currency boom, and the excitement is growing along with the increase in user databases and the number of transfers. This led to a significant increase in the value of commissions and, as a consequence, to delays in confirmation. One recent example is the freezing of the Ethereum network by the CryptoKitties application:
What commission should I pay?
Although this may seem controversial, but the increase in the cost of transactions indicates that Bitcoin, Ether and other crypto-currencies are becoming more popular, they are often used. But on the other hand, this can be bad news for your wallet, not everyone can afford to pay 40% of the transfer amount.
Most crypto currency purses allow you to decide for yourself how much you are willing to pay for your transaction. But it is worth remembering that transfers with zero commission or with a very low commission can hang in the network for a very long time.
At the same time, your transaction does not disappear anywhere, it just takes time (several hours, days, etc.) to load the network, and the miners added your transfer to the block. The higher your fee - the faster the miners will take care of processing your transaction and add it to the memplay.
However, it is quite difficult to determine which commission to exhibit. Now on the Internet you can even find special services - calculators, which help determine the optimal commission size. Some developers also decided to help users of their network in this matter and indicate the recommended commission amount.
Is there a way out of this situation?
There is another way to solve the problem, more risky and less popular. It consists in the transition to the use of another crypto currency, the network of which is not so loaded.
But you should remember that the infrastructure of such crypto-currencies may be less developed. For example, at the moment sellers of goods and services accepting Bitcoin Cash are less than accepting Bitcoin. Also, less popular crypto-currencies can have difficulties and technical malfunctions in the translation process, and the network itself may have vulnerabilities.
Now many developers are working on creating "off-the-shelf" solutions that will help solve the scalability problem and reduce the cost of payments, as well as increase the speed of the network. One option is the Lightning Network:
Lightning Network, what it is and how it works
While it is not clear when such solutions will be available to all users. But many analysts and experts agree that this "relief" will be short-lived due to the growing geometric progression of the network load.