Why are the network fees for cryptoassets so complicated?

The Fundamental Role of the Commission System in Practical Blockchain

Transaction commissions are not just a cost factor; they are at the core of the economic model of the Practical Blockchain network. This commission functions as a reward for miners and validators, while also serving as a security mechanism to defend against spam attacks.

As the number of transactions on the network increases, the Commission rises, and if the network is free, it decreases, implementing a dynamic pricing model. However, in situations of high market volatility, users may compete to pay higher Commissions, leading to unexpected surges.

The Background of the Necessity of Commission

When sending and receiving cryptocurrencies, commissions are incurred for two important reasons. First, they significantly increase the cost of spam sending, deterring malicious large-scale attacks. Second, they provide an incentive for network maintainers (miners and validators) and promote honest operations.

Transaction commissions can be viewed as a reward for contributing to the network. The higher the fee paid, the greater the likelihood of being included in a block, thereby increasing the approval speed.

The Mechanism of Bitcoin's Commission System

The first Practical Blockchain, Bitcoin, established a commission system that many current cryptocurrencies adopt. The founder, Satoshi Nakamoto, realized that commissions were an effective means of balancing defense against spam attacks and providing incentives.

Miners prioritize adding transactions with higher commissions from the unconfirmed transaction memory pool (mempool) to new blocks. This means that attackers need to pay a commission for each transaction, making large-scale attacks economically unfeasible.

It is technically possible to send with zero commission, but miners tend to ignore such transactions first. In other words, transaction commissions function as a simple yet highly effective spam filter.

How to calculate Bitcoin Commission

The commission for Bitcoin is determined by transaction size (in bytes) rather than the amount being sent. For example, with a transaction size of 400 bytes and an average commission of 80 satoshis per byte, a total of 32,000 satoshis in commission will be incurred.

During times of network congestion, many users set high commissions to have their transactions confirmed quickly, which causes the minimum necessary commission to rise significantly. This becomes particularly noticeable during periods of high market volatility, creating an inefficient situation where one pays several dollars in commission for a $3 coffee purchase.

The block size is limited to 1MB, which puts a limit on how quickly miners can add blocks to the chain. This fundamental scalability issue is behind the high commissions, and upgrades such as SegWit and the Lightning Network are efforts aimed at solving this challenge.

Ethereum's Commission Structure and the Concept of “Gas”

Ethereum's transaction commission adopts a different approach than Bitcoin. The fee based on computational power is called “gas”, and it is priced in the native token Ether (ETH).

Even for transactions with the same content, the gas price fluctuates depending on the network congestion. It is a mechanism where transactions from users who set a higher gas price are prioritized for processing by validators.

Calculation Method of Gas Commission

The total Commission of Ethereum is determined by the amount of gas required for execution and the respective gas prices. At the same time, the gas limit (the maximum amount of gas available for transaction execution) is also taken into account.

For example, if a transaction requires 21,000 gas and the gas price is 71 Gwei, the commission will be 1,491,000 Gwei, which is approximately 0.00149 ETH.

If Ethereum transitions to Proof of Stake (PoS), the network's computational load will be reduced, which could theoretically lower gas Commission. However, it is expected that validators will still prioritize transactions that pay higher Commission, so the price increase during network congestion may not be fully resolved.

Comparison of Commission Structures Across Multiple Practical Blockchains

Differences in Commission due to Different Consensus Mechanisms

Binance Chain (BC) adopts Delegated Proof of Stake (DPoS), where validators approve transactions. A fixed commission structure applies to transactions of BNB and BEP-2 tokens. By allowing discounts when fees are paid in BNB, it promotes the use of BNB and expands the user base.

Binance Smart Chain (BSC) operates on a PoA consensus and adopts a more flexible commission structure. It has introduced a gas system similar to Ethereum, where the computational power required for transactions and smart contract execution is reflected in the commission. The mechanism of distributing BNB as staking rewards provides incentives to network participants.

Specific Commission Calculation in BSC

The commission on BSC is displayed in Gwei, where 1 Gwei = 0.000000001 BNB. The higher the gas price set by users, the more prioritized the transaction is for addition to the block. As of March 2021, the average commission was around 13 Gwei, but it fluctuates depending on market conditions.

For example, in a transaction where the gas price is set at 10 Gwei and the gas limit is 622,732 Gwei, if 352,755 Gwei (52.31%) was actually used, the commission would be 0.00325755 BNB. Typically, BSC's commissions are extremely low, so it is rare to encounter situations where transactions cannot be executed due to a lack of BNB.

Scalability Issues and the Future of Network Commission

In many Practical Blockchains, the root cause of soaring transaction Commission is the limitations of scalability. Expanding processing capacity while maintaining decentralization and security is an eternal challenge in block design.

Some networks achieve high scalability and transaction throughput, but many make partial concessions on security or decentralization. A fundamental solution to this challenge is essential for cryptocurrencies to truly function as a means of payment in developing countries.

Multiple developers and projects are addressing this issue with layer 2 solutions, sharding, and other innovative technologies.

Conclusion: The Essential Role of Transaction Commission

Transaction commissions are not merely a cost factor, but a fundamental element in the crypto-economics of Practical Blockchain. This mechanism plays a multifaceted role in operating the network, rewarding users, and deterring malicious behaviors.

Currently, in some networks, commissions are skyrocketing, but this is merely a manifestation of scalability issues. For practical blockchain technology to achieve true financial inclusion, continuous improvement and innovation in this challenge are essential.