Transaction fees: why they change, on the XRP Ledger and Ethereum

Sending a crypto-asset almost always costs a small fee. The fee is not an arbitrary charge: it is part of how a public network protects itself and decides what to process first.

A public ledger is open to anyone. If transactions were free, someone could flood the network with millions of them. A fee makes that expensive. On some networks it also rewards the participants who include transactions in blocks.

On the XRP Ledger, the fee is called the transaction cost. According to the XRP Ledger documentation, it is not paid to any party: the XRP is irrevocably destroyed.

• A standard transaction currently costs at least 10 drops (one drop is a millionth of one XRP).
• The cost is designed to rise with the load on the network, so it can be higher on a busy day.

Ethereum measures the work a transaction needs in gas. The ethereum.org documentation describes two parts of the fee:

1. The base fee, set by the protocol for each block. It is burned, which removes it from circulation.
2. The priority fee, or tip, which goes to validators and encourages them to include the transaction.

When demand is high, users offer higher tips to be included sooner, and the base fee also rises when blocks are fuller than the protocol aims for. A simple transfer costs less gas than a complex smart-contract call.

On Bitcoin, the fee also affects timing: according to bitcoin.org, a low fee can delay the first confirmation.

• Check the network you are sending on: the same asset can exist on several networks with different fees.
• Look at the fee the wallet proposes, and what it will be paid in.
• Remember the minimum balance rules some networks have, such as the XRP Ledger reserve.

A fee is the price of using the network at that moment. It says nothing about the value of what you are sending.

Related: The XRP Ledger reserve explained · Crypto fundamentals · Uncle Sunny Akadémia

Educational content. Not investment advice.