Original title: High network fees: pains, explanations, and solutions

Original link: https://zengo.com/high-network-fees-pains-explanations-and-solutions/

Word count: 1480

Author: Ouriel Ohayon

Translator: La

Proofreading: freeyao

Translation agency: DAOSquare

Editor's Note: The author of this article is Ouriel Ohayon, CEO of digital wallet Zengo, who explained how to deal with high network fees from the perspective of wallet operators.

Network fees are a core part of the user experience. Even if we don't earn anything from network fees, we need to give you the best "paid experience" possible.

The past few weeks have been painful for our users, but so is the industry as a whole. Network fees have reached absurd levels that make it extremely uneconomical to execute almost any type of transaction on Ethereum or even Bitcoin.

A transaction on Ethereum and Bitcoin costs $10 (more than $10 in most cases) and using any decentralized application (abbreviation: Dapp) that utilizes smart contracts, transaction fees can be as high as 30 to $40.

The good news is: the rate level has returned to an acceptable level, and people can use Bitcoin and Ethereum normally again. The bad news: fees are still relatively high.

Next we explain what has happened to Ethereum and Bitcoin fees over the past few months, and our future plans for dealing with such issues.

What network fees are and what they are not

Before we dive in, we would like to clarify a few things to know about fees.

We know that you've been learning about Bitcoin and the crypto economy lately, and learning the crypto ecosystem is like learning a new language. Especially after years of using "banking" services, sending a transaction means paying a fee to the bank.

But decentralized cryptocurrencies are different. Unlike centralized services, ZenGo does not charge any fees for sending or receiving transactions. However, when sending any kind of transaction, you have to pay network fees.

Network fees are not charged by ZenGo.

These network fees are used to pay the network of miners who process and validate your transactions on the blockchain. Those fees are a reward for their work. Your transactions are validated and prioritized based on the value of the fee, thus affecting the speed of the transaction. Simply put: the less you pay, the more likely you will be slower to process transactions.

Network fees are not calculated as a percentage of the amount you send. Blockchain doesn't work that way. This may sound reasonable, but fees in the blockchain are pretty much the same, no matter the amount. It would also cost about the same to send $1 in bitcoin or $1 million or $100 million in bitcoin. Network fees arise from transactions that process complex calculations on the blockchain.

These fees are always calculated and named in cryptocurrency, although we denote them in local currency for your convenience. When checking fees, you should first look at the value of the cryptocurrency. This explains why the same fee can vary in USD price as it depends on the value of the cryptocurrency you use.

Additionally, network fees are volatile, changing over time based on the number of transactions being processed simultaneously (among other factors). The same transaction may cost $0.10 or $50 in network fees, depending on how busy the network is when you are transacting.

Finally: Depending on the blockchain you use, network fees are very different in cost and computation. There may be different fees for sending $1 in ETH and $1 in BTC.

Why are network fees skyrocketing?

The last few weeks have seen a frenzy in the new generation of investing and trading services in the Ethereum ecosystem (also known as DeFi), which has led to a massive increase in the number of transactions. As a result, the Ethereum network has become saturated and network fees have become prohibitively expensive, compromising all services including ZenGo.

Every service at ZenGo is a lot more expensive than usual. The savings feature we used on Compound became unusable for small deposits and many felt "scammed" because withdrawal fees were unacceptably high. We had to increase the minimum amount required for the exchange service to limit users from exchanging small amounts of currency at unreasonable fees. As stated above, we apologize for the inconvenience caused to you which is beyond our control.

Over a period of time, millions of dollars are spent every day. It can take a day for a transaction to arrive, sometimes longer. crazy.

This affects not only Ethereum fees, but Bitcoin fees as well. Why? Because there is a large amount of BTC deposited as collateral and "locked" in the Ethereum blockchain, providing additional liquidity for these services. This has led to a spike in Bitcoin network fees.

Unconfirmed transactions in Bitcoin's Mempool over the past few weeks.

Source: https://jochen-hoenicke.de/queue/#0,24h

Is everything back to normal?

The situation has eased somewhat over the past few weeks. Many DeFi tokens and services have lost momentum and activity has plummeted.

Fees have decreased back to acceptable levels

Fees reach more reasonable levels (as we say, ETH fees are around $0.5 per transaction), and many may find the services we offer reusable (including sending, investing in savings accounts, or crypto assets in ZenGo) transactions).

Some may still find the fees too high, and obviously everyone wants the fees to be as close to free as possible. We (and all other wallets) like this to happen too. This is a win-win situation for both wallets and customers.

That said, network fees are variable and can change rapidly.

What can you do now to avoid exorbitant fees?

Here are some tips to ease your situation:

1. For transactions that are not urgent, wait for a better time.

2. Pay extra attention to savings: Right now, if you're going to use small amounts of money or use the savings feature for a short period of time, don't do it. Interest is not enough for fees. It hurts to say that, but it's the truth. This is a temporary situation that will hopefully be resolved soon.

3. Monitor expenses so you can find the best time to operate. We built a new tool to track Ethereum charges, and here's a really nice tool for Bitcoin and one of the inspirations we used to build the Ethereum tool. You may find that certain times of day are "cheaper" than others. Find them and trade them when they're cheap.

4. Before confirming the order, check your transaction fee.

5. If you need to move money, use a "cheaper" blockchain. For example, Tezos and Terra (both powered by ZenGo) are particularly cheap right now.

6. Get free rewards by inviting friends, a great way to add some pocket money to cover your expenses.

7. Be extra patient. Blockchain transactions are not instant. Realizing this is a good first step. The less fees you pay, the more time it takes for the transaction to complete. Cheap doesn't always mean "better".

8. Track your transactions on the blockchain browser directly from ZenGo. Click on any pending transaction in ZenGo to find its current status.

9. Make sure your push notifications are on. This is how we notify you of "Deal Arrival" so you don't have to worry about it.

10. If you have any questions, please contact our 24/7 customer service. Our answer is fast and we will help you.

Fees are much lower on alternative blockchains, such as TerraUSD.

What is ZenGo going to do about this?

We all know that a good "paid experience" is one of the important pillars of a great wallet. While we hope that fees will not increase in the future, history tells us that fees are likely to spike again. We are making some improvements to reduce similar incidents in the future.

Some people think we should refactor our code to pay the lowest possible cost, it's not that simple. Paying very low fees can mean that your transactions will be delayed very unreasonably, sometimes not being processed at all.

But we can definitely do better and make this one of our top priorities for the next few months.

The ZenGo team is currently doing:

1. Make it clearer and easier to understand what you are paying for and why you are paying before you pay, especially during peak times.

2. Identify situations where you will be paying unusually high fees and help you make better decisions.

3. Optimize our algorithm to find the best and cheapest fee model.

4. Provide tools that give you more control over what you pay.

5. Support more blockchains that can better handle large-scale transactions and provide a convenient way to access or trade these assets.

6. Implement solutions that help lighten the load and dramatically reduce high costs.

You'll notice these improvements in the coming weeks and months, and as always, we welcome new ideas and suggestions, get in touch: contact@zengo.com.

ZenGo – Bitcoin & Cryptocurrency Wallet