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
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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