What is a Network / Blockchain fee in crypto?

The Network / Blockchain fee is a cryptocurrency transaction fee that is charged to users when performing crypto transactions. The fee is collected by the network in order to process the transaction on the network. This fee is to ensure that network is not misused by making unnecessary transactions.

The actual fee you pay will vary according to the network you use. For example, a Bitcoin transaction will have a different fee in comparison to transactions placed on the Bitcoin Cash, Ethereum or Litecoin network. There are even tokens that require a secondary or “gas” token to pay the network fees.

Why is there a need for network fees?

Mining is the process through which cryptocurrency transactions are gathered, verified and recorded into a digital ledger known as blockchain.

For proof of work blockchains like Bitcoin and Ethereum, the miners get block rewards. ‘Block reward’ refers to the cryptocurrency rewarded to a miner when they successfully validate a new block. A block is composed of transactions that are already verified or confirmed by the miners, and they are chained together to form what we call a blockchain.

Proof-of-Stake systems usually use transaction fees as a reward. When a validator gets chosen to forge the next block, it will check if the transactions in the block are valid, sign the block and add it to the blockchain. As a reward, the validator receives the transaction fees that are associated with the transactions in the block.

The work done by miners and validators is essential for maintaining the integrity of the network. This is why fees are essential in order for a network to work smoothly.

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