Why Do Crypto Transactions Sometimes Cost More Than the Amount Sent?

0:00This audio is presented by Hacker Noon, where anyone can learn anything about any technology. Why do crypto transactions sometimes cost more than the amount sent? By O-Bite. Crypto is often associated with cheap, fast, and borderless transactions. Therefore, finding ourselves suddenly paying astronomical fees just for sending a little money seems to make no sense. It may happen, though. One day, you might want to transfer just five dollars worth of coins and discover that the network fee costs two or three times more than the payment itself. Yikes. Why does this happen at all? Well, the thing is that most crypto networks don't have limitless capabilities. Each block in a blockchain, for example, can only hold a certain number of transactions. For this reason, fees are also necessary. They prevent malicious actors from making worthless transactions simply for the sake of it. Spam. Let's see more of this. Why do crypto fees become expensive? There's usually a very specific reason plastered across headlines, but in general, it's because too many people are using the network at the same time.

1:04Osfool concept here is TPS. Transactions per second. Every crypto network and payment processor has its own TPS capacity. Bitcoin, BTC, has three to seven TPS at the moment. Ether, Ether, processes 15 to 30 TPS. Polygon offers up to 1000 TPS. BNBIS over 4000 TPS. Envisa handles over 83,000 TPS. These figures don't mean that one is better than the other. However, the fewer transactions per second a network can process, the more susceptible it is to fee spikes during periods of heavy demand. It's a bit like finding a taxi at midnight, after a concert, at the same time as the rest of the attendees, using the same provider. There are only so many cars available, so whoever pays the most will get the ride. That's how most blockchains work, too. Bitcoin has experienced this several times, especially before the SegWit updating 2017 and after the arrival of ordinals, NFTs, in 2024. Average transaction fees back then increased up to $127, even. Ethereum,

2:12ETH, has its own history with it, too. During NFT crazes and periods of intense trading, transaction fees spiked up to $196. Thanks to various updates and a normalization of activity, those ones so expensive figures now rarely exceed $1. Could something like this happen again with these and other cryptocurrencies? Yes, their capacity is still not unlimited, and they could become congested again in cases of extreme activity. For people making small payments, those fees can become an unpleasant surprise. How can you avoid paying more in fees than you're sending? Maybe you won't like this one, but the first option is just patience. Network activity goes up and down, and fees often shrink during quieter periods. It helps that many wallets, including O-Bite, display an estimated fee before the transaction is sent, giving users a chance to wait or choose another network. Another option involves technologies built for cheaper payments. The lightning network on Bitcoin and other layer 2 solutions in other networks,

3:12like payment channels in O-Bite, allow very small transactions to move outside the main chain with much lower costs and higher speeds. Depending on what acid you're looking to trade or exchange, you'll need a different layer 2 platform, so it's up to you to do your own research, dy-or, there. O-Bite, for its part, uses a directed a cyclic graph, dag, structure instead of blocks. Its design allows transactions to be added continuously, and transaction speed can increase as network activity grows, up to the network's capacity. Like any distributed network, though, it has bandwidth limits, so congestion and higher fees can still occur during periods of high demand. Outside those periods, fees are often tiny. The same approach extends to every token inside the O-Bite ecosystem, including assets bridged from other networks through CounterStake. Tokens such as WBTC, USDC, BNB, and F can move through O-Bite while benefiting from the network's low transaction costs. A small payment shouldn't require a large fee. The good news is that crypto keeps evolving,

4:16and many networks are searching for better ways to handle growth. A few of them already led tiny payments stay tiny from start to finish. Featured vector image by campus, Magnifique thank you for listening to this Hackernoon story, read by Artificial Intelligence. Visit Hackernoon.com to read, write, learn, and publish.