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What are Network Fees?

Understanding Cryptocurrency Network Fees​

Network fees, also called transaction fees, are charges that users must pay to perform transactions on a cryptocurrency network.

These fees are essential for several reasons:

  • Rewards for Miners/Validators: Network fees are a way to incentivize miners (in Proof-of-Work systems like Bitcoin) or validators (in Proof-of-Stake systems like Ethereum 2.0) for their role in processing and confirming transactions.

  • Network Security: By incentivizing miners and validators, network fees help maintain the security and integrity of the blockchain. Without these fees, there would be less motivation to participate in the network, making it more vulnerable to attacks.

  • Transaction Priority: During network congestion, users can pay a higher fee to have their transactions prioritized. This creates a competitive market where users have an option to get their transactions confirmed quickly, and thus gives further incentive to the miners and validators.

Examples of Network Fees​

  • Bitcoin (BTC)

Bitcoin transactions are processed by miners who solve complex mathematical problems. The fees on Bitcoin are measured in satoshis (the smallest unit of Bitcoin). Higher fees can lead to faster transaction confirmations, especially during periods of high demand.

Bitcoin Transaction Fees Checking Bitcoin Transaction on Blockchair

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  • Ethereum (ETH)

Ethereum uses the term "gas" to measure the computational effort required to process transactions and smart contracts. Gas fees are paid in ETH and can vary significantly based on network activity.

Network Fee when Sending ETH Network Fee when Swapping ERC20 tokens

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  • Solana (SOL)

Solana uses its own Proof of History (PoH) consensus to achieve high throughput and low transaction costs. Solana's network fees are very low compared to other major blockchains.

Network Fee when Sending SOL Network Fee when Swapping SPL tokens

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Does Gem Wallet Take Network Fees?​

As explained before on the question, Does Gem Wallet Hold My Funds?, Gem Wallet is not a centralized wallet or crypto exchange. All it does is give users a way to interact with the blockchain that you are connected to.

It submits the transaction to the network, and the fees goes straight to the miners and validators.

No funds are held on the wallet. No fees goes to the Gem Wallet team.