DeFi Wallet is a decentralized wallet in the sense that there’s no intermediary to handle your crypto assets, the DeFi Wallet serves as a mobile app interface to enable you to interact with the Blockchain Networks directly via our easy and user-friendly UI.
Transactions initiated on the DeFi Wallet are submitted on-chain directly and require network fee to incentivize the corresponding Blockchain Network to validate and confirm your transaction actions. Other than the fees that go to the network, DeFi Wallet does not charge any network fees.
The beauty of transacting on-chain is that there’s no single point of failure, even if the DeFi Wallet is not working properly, you can easily backup your 12-word recovery phrase which is equivalent to your master private keys and import your wallet to any other non-custodian wallet app interfaces to see your balances and initiate transactions.
If you prefer to transact via a custodian app with instant confirmations and zero fees, you may check out our Crypto.com App instead. See here for the differences between DeFi Wallet and Crypto.com App.
Why do I need to pay network fee for my transactions?
The use of any Blockchain network (Bitcoin, Ethereum, Ripple etc.) requires a fee to send a transaction as the network validates and confirms your transactions with the help of people (miners or validators) who are constantly spending their computational resources to help process and secure transactions on the network. As an incentive, the network fees go to them.
How are network fees determined?
It depends on the corresponding Blockchain’s consensus mechanism. Popular Blockchains like Bitcoin, Ethereum are using Proof-of-Work consensus, which is less scalable compared to Cosmos, Polkadot using Proof-of-Stake consensus. For example, Bitcoin can only process ~5 TPS (transactions per seconds) and Ethereum can process ~3,000 TPS vs Cosmos at ~10,000 TPS.
When many users are transacting at the same time, the network gets congested and hence the calculation of network fees varies and depends on the traffic. When the market is bullish and users are transferring assets more frequently or using DeFi products on the ETH network, this significantly drives up the network fees for ERC20 tokens.
This is also why Ethereum is upgrading to ETH 2.0 that will use the Proof-of-Stake consensus and leading to new Blockchain networks’ development to solve the scalability issue.
Why is it so costly to perform certain transactions like swap, deposit sometimes?
The network fee depends on the Blockchain network you are transacting on and how busy the traffic is. Please refer to the previous question to find out more. Certain transactions that involve smart contract execution would also cost more than normal transfers as more computational power is required to execute the smart contracts set up by the DeFi protocols, hence a higher gas limit is required and this leads to a higher network fee.