It is very important to chose cryptocurrency wallet according to intended use. If you do not know by know, let me emphasis: the blockchain based “money arena” is not centrally controlled. That brings a planet of good things, but still a comet of bad things can fly buy from time to time. What do I mean? I mean every wallet vendor can set their own transfer fees. I mean every online exchange website can set their own conversion fees. I mean you should be sure who holds the coins you buy into certain wallet.
Everything is decentralized + No one is in control => You have to read carefully, you must be in control
Let me give you a simple example in form of drama, like in theater.
To set up a stage, let me introduce the main characters:
- Coinbase – very popular web based wallet platform
- Blockchain Wallet
- 1 EUR worth of Bitcoin
- yours truly
The money is in Coinbase. Goal is to to transfer it to Blockchain wallet and then back and measure the loss.
I open Blockchain wallet, click on Request, chose Bitcoin and copy the address where money should land.
Then I moved to Coinbase, click on Accounts / BTC Wallet / Send. In the recipient field it learly says “Enter a BTC address”. That is the place to paste address copied from Bitcoin wallet second ago.
I enter value of 1 EUR and it is calculated to -0.00060554 BTC which I click without checking actual value.
What I didn’t notice is that my transfer is actually 1.90 EUR! The fee was 90% on top of my 1 EURO sending. I proceed anyway, thinking that there is maybe minimum transferable bitcoin amount.
I should have known better, because smallest fraction of BTC recorded in blockchain is 1 Satoshi, which represents 1/milion bitcoin. And by todays bitcoin price it is 0.003136 EURO. So no problems to transwer 1 EUR.
I click transfer, wait for 3-4 minutes and this is what shows up in my Blockchain wallet 0.000315 BTC. So 0.00060554 BTC transferred to another wallet dropped for almost 100%!?!
I then decide to try what will happen in opposite direction. Take public bitcoin address from Coinbase, use it in Send dialog from Blockchain and my 0.000315 BTC flew away. After couple of minutes they showed up as new value of +0.0003037 BTC (≈ €0.95).
Frak me sideways! (thought I to myself). I wanted to send 1 EUR. Coinbase sent 1.90 (?!?). Amount of 0.99 landed at destination (where did 97.1 wanish ?!?).
Then I sent 0.99 EUR (0.000315BTC) back and ended up having 0.95 EUR.
So, sending 1 EUR worth of Bitcoin from Coinbase to Bitcoin Wallet and back resulted in
0.00060554 BTC -> 0.0003037 BTC
What did actually happen? It is not as bad as it looks. The problem is that I was not reading everything. So I will repeat the tip for today:
Read everything! There is no formal regulatory body that will protect your interest like with banks.
Not long ago, Coinbase has introduced 1.90 USD as minimum fee. I think it is like that up to 100 or 200 USD transactions. See, I read, but already forgot exact figures. What I know that before there were percents, and everyone was happy.
The problem is that link leading from the little question mark explaining transfer fee from Coinbase to somewhere else does not mention minimum fixed fee. Try to read here https://support.coinbase.com/customer/portal/articles/815435
All is good. On 100 EUR transaction the fee will be like 1-2% on Coinbase. On 1 EUR transaction the fee only on Coinbase turns out to be 90%. So if I had implementation of microtransactions. Lets say I was pulling big data from some system that is charging minimum amount of BTC per query. In that case, using Coinbase wallet would get you bankrupt. Your software would just drain almost 2x more money then if you used another point of payment. Before setting up micro transactions, read carefully if there is minimum fee.
The native blockchain fee is very affordable. Here it is for today’s example:
- Fee for sending forth 0.00037812 BTC (what was left after Coinbase took the fixed fee from 0.00060554 BTC) was 0.00006312 BTC (~0.19 EUR)
- Fee for sending back 0.000315 BTC was 0.0000113 BTC (~0.03 EUR)
If you find this post useful, and especially if it saves you money, you can buy me coffee with Bitcoin. Mind the fixed fee in Coinbase 🙂