In order to ensure that cryptocurrency transactions are processed on the crypto network successfully, network fees are paid to the respective miners, independent of Bitpanda.
Network fees are small amounts of coins or tokens sent in blockchain transactions and are given to miners as a reward for their work. The respective fee varies depending on the network used.
Why do miners receive network fees?
Miners play a vital role in validating cryptocurrency transactions and keeping the whole system up and running. After a crypto transaction has been successfully validated by a miner, it is then recorded in a distributed public ledger and inextricably linked to any prior and subsequent transactions, creating a link of time-stamped records also known as a blockchain.
Network fees are used to compensate miners for their time and energy spent in order to keep the network secure and to ensure that new transactions are processed in a timely manner. Naturally, the bigger the network fee for a particular transaction, the greater the incentive for the miner to treat this transaction with priority.
Why does the amount of network fees fluctuate?
The amount of the fee paid for every transaction on the network is determined by the network load. If network traffic is high with lots of incoming transaction requests, the average network fees increase. Likewise, if the demand is low, the fees will usually decrease significantly.
For further information on network fees, please refer to this respective Bitpanda Academy article.
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