What are the hidden charges of Bitcoin wallets?

In this article, we’ll reveal five ways in which cryptocurrency brokers are taking their cut while your investment is shrinking all the while. Let’s try to figure out how much it will cost you to get your tokens safely delivered into your wallet.

1. Network Fees

Dealing with platform fees is nothing new. Cryptocurrency brokers are working with businesses and paying for the services they provide is to be expected. However, your stake is starting to shrink even before reaching them. Due to the decentralized nature of cryptocurrencies, you have to pay the standard network fee for using the blockchain, known as the transaction fee paid to the miners.

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All blockchains have their own system for transaction fees. Although setting the amount you’re willing to pay is in your control in your wallet’s interface, it’s much more limited than you think. The lower the transaction fees you are willing to pay, the longer it will take for your transaction to be verified. Currently, most blockchains have a limited block capacity. Your transaction priority is set by the amount you’re willing to pay, thus miners are financially motivated to solve the block with the highest transaction fees first. So the fee is up to you based on the urgency of your transaction.

2. Wallet Fees

No, your tokens haven’t reached the broker platform yet and there are still charges on the way. While the previously mentioned network fee is common for everybody, regardless of the way you’re choosing to access the blockchain, the wallet fee is trickier and can be avoided altogether.

Having a cryptocurrency wallet is the same as having a valid blockchain address. The blockchain is a peer-to-peer network run by the people using it. Miners running full nodes are powering the network and they are getting paid for it (the network fee). Creating a wallet (generating the address), receiving some tokens, or sending them to another address is all done on the blockchain network. With enough programming knowledge, you can programmatically access and broadcast these by yourself.

3. Premium rate

If you are new to crypto or occasional investing, you might prefer the simplicity of services like ShapeShift or Coinbase. But this comes at a price.

While there are community-driven solutions for wallets, third-party exchange services don’t have terribly efficient solutions. The companies who are making it convenient for you to exchange your tokens on their website are charging for it. When you purchase some tokens you aren’t really buying them from a person.

4. Exchange Fees

Going for an exchange must be the way, right? Well, there’s a catch. Not only are they charging a fee on every trade you make on their platform but, in most cases, they’re also taking a cut on each deposit or withdrawal. Exchanges are profitable businesses, as profitable as Binance, the biggest exchange by daily trading volume that raked in $446 million in 2018 alone. You might be tempted to follow the crowd and join the most popular option, but usually these companies are riding the popularity wave and their offer is not the best you can get.

5. Conversion Fees

What other charges are hidden in the great scheme of things? Conversion fees. If you deposit US dollars into an exchange that only accepts euros you will also need to pay a fee for converting your currency. How bad can the rate be? Well, Coinbase adds a spread of between 0 and 200 basis points (0–2%) to the exchange rate. That’s a lot!