Why does FTX pay Gas fees for you?
This article describes and explains how FTX handles gas fees for on-chain transactions. FTX bears and subsidizes fees charged by an efficient, environmentally friendly blockchain. FTX bears almost all blockchain gas fees for users, however FTX also reserves the right to charge transaction fees for certain transfers on less efficient chains.
A trading platform like FTX must integrate various different blockchains so that customers can transfer funds to and from the platform. Although each of these blockchains (Bitcoin, Ethereum, Solana, etc.) has different characteristics, they all have one common characteristic: all users of the network must pay transaction fees to incentivize network participants to complete "work" (i.e. mining), adding that transaction to the blockchain's decentralized ledger. These fees are called gas fees on Ethereum, and gas fees can also be used to represent transaction fees on other chains.
So how does FTX handle the gas fee of the blockchain (someone has to pay)? When interacting with FTX, under what circumstances do I need to pay Gas fees? What exactly does FTX end up charging clients? Why charge?
First, a little background:
Complete process of "recharge, transaction, withdrawal"
Cryptocurrency trading platform promotion There are three main functions for users to conduct transactions:
1. Accept cryptocurrency and fiat currency recharge
2. Match buy and sell orders (exchange one currency for another)
3. Handle cryptocurrency and fiat currency withdrawals
As an example, what such a complete flow would look like from a user's point of view:
1. Alice sends 1 bitcoin to her FTX wallet. FTX sees all transactions that happen on the Bitcoin blockchain, recognizes her deposit and credits 1 Bitcoin to her FTX account.
2. Later, Alice decides to exchange her Bitcoin for Ethereum. She sends an order to buy 12 ETH for 1 BTC, FTX matches her buy order with a seller, and the transaction happens.
3. Finally, Alice wants to withdraw her ETH from the exchange and instructs FTX to transfer her 12 ETH to her private wallet on the Ethereum chain.
For step 1, Alice must pay the gas fee to the Bitcoin blockchain in order to recharge FTX (1 bit from her Bitcoin wallet Bitcoins are sent to her wallet at FTX, the transaction fee is deducted from the total amount of 1 bitcoin; only after the transaction fee is paid, the bitcoin miner will "confirm" or "execute" the transaction). Step 2 does not require Gas fees, because the transactions on FTX happen completely off-chain (this is also one of the benefits of centralized trading platforms such as FTX). However, step 3 will require FTX to send a transfer request to the Ethereum chain, so FTX needs to pay the gas fee on behalf of Alice.
How much is the blockchain gas fee
The actual amount required for a blockchain to send a transaction varies depending on the underlying structure of that blockchain. On PoW (Proof of Work) networks like Bitcoin and Ethereum, the "work" required to add transactions to the blockchain consumes a lot of computing time and energy. On such chains, the average gas fee is quite high: about $2 per transaction in Bitcoin and about $40 per transaction in Ethereum. (Gas fees may vary greatly depending on network requirements)
There are other blockchains that use more efficient ways to verify transactions. Solana, Cardano, and Polkadot use PoS (Proof of Stake) as an approach. On Solana, the average transaction fee can be as low as $0.00025.
FTX withdrawal fees
FTX does not charge any fees for withdrawals on the PoS network, and will subsidize half of the gas fees for PoW network transactions (users pay the remaining half). However, FTX reserves the ability to charge withdrawal fees, especially for small transactions (especially if a series of small withdrawals or other transactions were conducted in an abusive or otherwise unnecessary manner).
There are some important considerations behind this charging method:
Environmental impact
PoW requires a much larger energy consumption than PoS. Our goal is to incentivize our customers to use the blockchain with the lowest energy usage, resulting in minimal impact on the environment. One Solana transaction requires roughly the same energy as two Google searches. As a rule of thumb (based on our analysis of actual customer activity), 80% of blockchain transactions related to FTX take place on PoS networks.
Blockchain public usability
Blockchain is a public good that anyone can use. Therefore, users of the blockchain, especially large users such as trading platforms, should encourage fair use.
Imagine someone wants to withdraw $100 worth of bitcoins from FTX to their private bitcoin wallet. They can do this transfer with one transaction, or they can send $0.01 of Bitcoin at a time, for a total of 10,000 transactions. FTX reserves the ability to charge fees for small transactions to incentivize the former and disincentive the latter in order to put as little pressure on the blockchain network as possible, reduce unnecessary and redundant costs, and ultimately reduce unnecessary and redundant energy usage.
Business Costs
FTX wants to encourage users to bring their assets to our trading platform for trading, because we believe that we have the ability to ensure customer safety, technical stability and regulatory compliance best method. This is part of the reason we decided to subsidize gas fees. However, with an expensive network like Ethereum, if we don't pass some of the costs on to the users, then clients can abuse the system by initiating large numbers of small transactions, which can be costly for FTX (although these costs are much larger than This behavior has less impact on the environment and network congestion). Similarly, FTX does not charge users wire transfer fees to or from fiat currency, which can also be very expensive. However, FTX reserves the right to assess wire transfer fees if wire transfers are abused, or otherwise encourage users to adopt more efficient methods of transferring their fiat currency. In actual operation, FTX rarely asks our users to pay wire transfer fees.
Incentivize users to choose blockchain
Finally, with the advancement of blockchain technology and interoperability, many cryptocurrencies can be transferred across multiple different blockchains. For example, on FTX you can withdraw USDT to an Ethereum wallet (USDT comes from Ethereum), but you can also withdraw USDT to a Solana wallet, and on FTX this is free. Why is the latter free? Because of all the factors above, we want to incentivize users to use Solana.
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