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Fundamentals 3 min read

What Are Network Fees? (Gas Explained)

Why you have to pay to send crypto, how confirmations work, and what happens behind the scenes.

Key Takeaways
  • Network fees are like postage stamps for your digital money.
  • Fees pay the miners/validators who secure the network.
  • You must pay fees in the network's native currency (e.g. ETH for Ethereum).
  • Confirmations = Security. More confirmations mean the transaction is irreversible.

When completing transactions on a blockchain network, such as sending or trading cryptocurrency, network fees must be paid. But why do we pay them, and where do they go?

The Postage Stamp Analogy ✉️

Think of network fees like postage stamps.

  • If you want your letter delivered, you need a stamp.
  • If your mail is urgent (overnight delivery), you pay for a more expensive stamp.
  • If the post office is busy (network congestion), the price of delivery goes up.

Why are they important?

Without paying network fees, your transaction will never be picked up by the "mailman" (the miners). These fees incentivize the miners/validators to process your transaction and keep the network secure.

How Fees Work

The fee doesn't go to the wallet app; it goes to the network itself.

  • Ethereum Network: You pay fees in ETH (Gas).
  • Binance Smart Chain: You pay fees in BNB.
  • Bitcoin Network: You pay fees in BTC.
The fee will come out of your wallet automatically. You generally cannot pay Ethereum fees with USDT; you need actual ETH in your wallet to cover the cost.

Visual Learner? 🚌

Check out TxCity.io. It visualizes transactions as people trying to board buses (blocks). If you pay a higher fee, you get a seat on the next bus. If you pay a low fee, you have to wait at the bus stop.

Deep Dive: What is a Confirmation?

When you send money, you might see a status like "1 Confirmation" or "Unconfirmed". A confirmation means a transaction has been verified and successfully added to a block on the blockchain.

  • 0 Confirmations: The transaction is broadcast but not yet written in the book. It's "pending."
  • 1 Confirmation: It has been written in the latest block.
  • 6+ Confirmations: Several more blocks have been added on top of yours. It is now mathematically impossible to reverse.

Example: Buying a Coffee with Bitcoin ☕

Imagine you're at a café that accepts Bitcoin. You order a latte and scan the QR code.

  1. You Send: You send 0.001 BTC. This includes a small network fee.
  2. Pending (The Wait): The transaction hits the network but is "Unconfirmed." The barista sees the payment is incoming but hasn't cleared yet.
  3. First Confirmation: A miner picks up your transaction and adds it to a block. Ding! The payment is verified.
  4. Transaction Complete: You enjoy your coffee.

Pro Tip

Why wait? For small purchases (coffee), 0 or 1 confirmation is usually fine. For massive purchases (buying a house or a Lambo), the receiver will wait for 3-6 confirmations to be absolutely safe.