I’ve heard the argument that low transaction fees are one of the advantages of cryptocurrency payments – but in my experience this isn’t remotely true comparing gas fees vs. a traditional payment method. For that matter, they’re not particularly quick or simple transactions either. It seems strange that this is consistently touted as one of the major reasons why cryptocurrency will become widely adopted in the future.
What am I missing?
In: 5
With normal transactions at a store, the business eats the transaction fee. It’s why some places have minimums for using credit card
There are cryptocurrencies, like Nano, that have absolutely 0 fees and send instantaneously.
Keep in mind that ALL of the arguments why cryptocurrency will become widely adopted in the future are just hypothetical.
In fact, it’s quite possible that crypto will never become widely adopted.
While there are admittedly some potential benefits of crypto, things really aren’t looking good in the short term. Hardly anybody is using it for everyday transactions like you’re talking about, and 99% of the transactions are either illegal goods and services, outright fraud, or speculation.
As you discovered, there’s almost no benefit to using crypto for an ordinary transaction, and there are a lot of drawbacks:
* It can take a long time for the transaction to complete – minutes instead of seconds
* The transaction fees are higher than credit cards
* The price of crypto relative to normal currency (USD) fluctuates too much; nobody prices things in Bitcoin because they’d have to change the price *daily.*
* Crypto offers far less protection than credit cards. If someone steals your crypto, it’s gone, just like cash you dropped on the street.
* The association with illegal activities doesn’t help – when 99% of crypto transactions are fraudulent, that makes people suspicious
The people who want to tout the benefits of cryptocurrency almost exclusively have vested financial interests in cryptocurrency
You’re correct, crypto tends to be significantly slower and less efficient than traditional financial institutions. The people telling you otherwise are trying to build up hype around crypto, so that you’ll buy into it and give them money
It’s always good to be very skeptical of someone trying to convince you to do something that’ll directly benefit them, even if they say it’ll make you rich
There are a few layers to this that you are missing. I’ll try to avoid the politics and just explain the concepts.
The average ETH transaction fee today is $1.30, and takes 12 seconds to complete. If you wait for 30 confirmations (basically a measure of safety), it’s 6 minutes. If that seems like a lot to you, it’s probably because you’re comparing it to other services you use where these things are hidden from you.
If you are comparing ETH to a $10 Venmo transaction, you should just use Venmo. PayPal/Venmo are covering the fees for you so you’ll be incentivized to use their service.
Why do they let you send transactions for free? Because they make up the money charging a % fee on larger transactions, currency conversion, and especially commercial customers (just like credit cards). For example, Venmo charges ~2% to sellers for each transaction. They will also charge you a fee of 1.75% if you want the transfer to be instant instead of a multi-day bank transfer.
So that $10 transaction is free on Venmo and takes 2-5 days (when your friend withdraws it).
A $500 transaction to a store would cost $10, and take 2-5 days for the merchant to withdraw.
An $10 ETH transaction would cost $1.30 and be available in 6 minutes.
A $500 ETH transaction would cost $1.30 (usually) and be available in 6 minutes.
This is without getting into the banking transfer system which underpins those Venmo transactions, identity verification, or international payments.
Suffice to say that crypto has advantages in certain types of payments. It may not make sense for your personal use case if you just want to send $10 to a friend, but it does for others who want to take advantage of those benefits.
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