The transaction fee amount is influenced by various factors, with the most crucial being the demand and capacity of the blockchain network associated with the cryptocurrency.
In instances where many transactions are occurring on a cryptocurrency network with limited throughput, congestion can quickly arise, leading to an increase in average fees. Transaction fees act as a mechanism for prioritizing transactions when the network faces more transactions than it can process, resulting in a backlog.
Transactions with higher fees receive priority, while those with lower fees may be delayed or rejected during peak times. Sending a transaction with a low fee during periods of high network activity can result in extended pending times or rejection.
Different cryptocurrency blockchains exhibit varying throughput capacities and usage levels, thereby impacting transaction fees. Popular blockchains like Bitcoin and Ethereum, which also have limited throughput, often experience higher transaction fees. The fees on busy blockchains can fluctuate significantly based on market events and news, while blockchains with cheaper transactions typically have high throughput (e.g., Solana or Binance Smart Chain) or low usage levels (e.g., Litecoin or Doge).