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An explanation of Bitcoin fees

Team Luno
3 minute read

We're changing our fees. Up until now, sending and receiving Bitcoin with Luno was free. But the network is changing and we've had to make this change to continue providing you with a safe, simple platform.

In this post, we'll explain the fees, why we've added them and how you can continue using Luno for free.

Bitcoin is often advertised as a cheap solution for small payments. Known as micropayments, these low-value transactions are expensive for businesses because of bank fees. You've probably seen that many independent shops charge 50p for payments under £5. That's because it's not worth the processing fees otherwise.

So, Bitcoin used to be a good option for micropayments because it cost less than using a bank. But that's not the case any more. To understand why, we need to take a quick look at the technology behind cryptocurrencies.

You've no doubt heard about the Blockchain. This is like a digital record book, except it's not stored in any single place. It's distributed between the computers of everyone who runs the Bitcoin software. So it can't be edited or tampered with, and it's extremely secure.

The downside is that every Bitcoin transaction needs to be recorded by every computer in the network. One way to think of this is to imagine a group of thousands of people who each have to write down the transaction details. It would take a lot of time, paper, ink and effort to do. Even though the costs might be small for each person, it would add up as the network grew. If the number of transactions increased, it would be even harder for those people to keep up. At some point, they would happen too fast for everyone to write them down, so the network would have to pause and let them catch up.

That's what it's like for the Bitcoin network. As it's grown, the costs of running it have risen. A lot. While it used to be inexpensive to process transactions, the price of all that power and computing resources has gotten enormous. With so many people using Bitcoin now, the poor Blockchain can't cope.

So we've ended up with major delays. The people operating the network decided that the only way to solve this problem and help them cover their costs is to start charging fees for transactions.

Here is a graph showing the daily Bitcoin network transaction fees over the last few years:

Up until now, Luno chose to pay your transaction costs for you. But more people than ever now use Luno and fees are 20 times what they were. So we're adding fees for sending and receiving Bitcoin.

Luno doesn't profit from this. We only charge you what the network charges. Luno doesn't set those fees, and we'll adjust them if any new technologies make the network more efficient.

Update: In February 2017, Luno integrated with SegWit, a Blockchain update that cuts the fee for sending Bitcoin by as much as 25%. We'll continue keeping an eye out for anything that can help us save you money.

A free alternative

But it's still possible to send and receive Bitcoin for free! If a transaction is between you and another Luno customer, we can process it ourselves, rather than asking the network to do it.

This feature is already available to all Luno customers. Enter the email address or mobile phone number of the recipient when sending your payment and we’ll process it instantly with zero fees.

For more information, check out the following Help Centre articles:

All our pricing information on a per-country level is in the Fees & Features section.

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Team Luno

The Luno blog conveys the views of Luno and the people within our team. We will never provide financial or any other form of advice. We urge you to conduct your own research before purchasing or trading any cryptocurrencies. Always be aware of the sometimes volatile nature of the market, and never trade with funds that you cannot afford to lose.

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