Network and Gas Fees | Overview

On blockchains, each node is incentivized to provide the processing power to add a new block to the chain by the promise of collecting a reward. One such reward is a network fee. A fee is paid per transaction in the network’s native currency by the blockchain address wishing to execute the transaction.

These fees serve an important role:

• Network fees help pay for network security by rewarding the people who keep track of activities across the network. Without these fees, these people would be supporting the network at their own financial cost, which would be unsustainable.
• Network fees incentivize people using the network to send transactions back and forth with purpose. If transactions were free, it would be easy for anyone to spam the network with meaningless transactions and therefore threaten its stability.
• Not all network fees are calculated the same—Anchorage Digital simplifies this by managing network fees on behalf of clients. These fees differ by blockchain, and it is important to understand the key differences.
• On Ethereum, the fee is referred to as gas fees, while on Bitcoin it is referred to as simply a “transaction fee”.

Some helpful resources for clients to review to gain a deeper understanding of network fees: Chapter six in the Bitcoin Whitepaper, and the “Gas and fees” article on Ethereum’s website.

For any blockchain interaction for Anchorage Digital

• We require the wallet interacting with the blockchain to pay the transaction fees related to that transaction.
• We require the wallet to hold enough balance to pay for the eventual transaction fees.
• The required balance to hold is either:
  • Estimated: for withdrawals, staking and smart contract operations. The estimate is generally very conservative to ensure that at broadcast time one still has sufficient funds to pay for gas.
  • Fixed: referred to as “Fee threshold” for transfers initiated through API.
• The actual fee set when the transaction is broadcast to the blockchain is always based on an estimate of the network fees and some “overhedge”.

Transaction FeeThreshold (API only)

In order to ensure on-chain operations triggered by API have the highest probability of processing transactions during times of high fees and market volatility, Anchorage Digital has an internal FeeThreshold() defined for each protocol (listed below for reference) which will be held for EACH on-chain API operation. These are intentionally VERY conservative in nature.

This FeeThreshold is simply an internal "sufficient funds + sufficient funds for transaction fee" check used by Anchorage Digital, so that in the case where multiple transfers or operations are triggered from the same wallet, there will be funds to process the transaction. Once this internal check is passed, the transaction is either processed on-chain and actual fee is charged, or if the transfer is queued, the transfer amount and feeThreshold will remain under hold and not accessible for clients to double spend. If the wallet does not have sufficient funds, the API call will return an error.

This internal feeThreshold is fixed for all assets and is not indicative of the actual fee charged at the time the transaction is broadcast. The actual fee can be higher or lower depending on the network conditions at the time of the broadcast.

This is not applicable for iOS or Web operations.

Gas limit

The term gas limit can be confusing to understand. The term “limit” is used here to denote the fact that a user of the Ethereum blockchain must specify how many units of gas he is willing to pay to get his transaction executed. The number of units of gas represent the “work” miners and the network need to do to execute the transaction on chain. The work needed depends on the complexity of the interaction.

For example, a transfer request of ETH is simpler than a transfer of an ERC20 token; executing a smart contract that swaps 2 tokens would require more work than a transfer of a simple token.

A user might want to specify a gas limit higher or equal to what is required or risk his transaction failing on-chain.

Note that for a transfer of ETH exactly 21000 units of gas are required. Transfers of ERC20s and other smart contract interactions can require substantially more.

Base fee

The base fee is set by the network and serves as a way to manage network congestion. To be eligible for inclusion in a block, the offered price must at least be equal to the base fee.

The base can change from one block to another (increases by 12.5%) if the previous block reaches a threshold (is more than half full). It decreases similarly if the block is below the threshold.

Gas station

The Anchorage Digital gas station can be a convenient option to pay for gas fees when making a withdrawal or transfer.

The gas station is enabled for the entire organization, and is currently available for ETH and ERC-20s withdrawals and transfers only. If you don’t see the gas station toggle available in your UI, reach out to your account executive for enablement or the transfers API will fail.

Note that gas station is optional for each transfer:

• The useGasStaion flag default is set to False:
  • ETH will be deducted from the same address as the transfer. If insufficient ETH is held in the wallet, the transfer will fail.
• If the useGasStation is True:
  • An estimate of the gas fee will be transferred into the address and used for the transfer initiated by the API call.
  • Any unused ETH will remain in your address.
  • Anchorage will bill for the gas used on a monthly basis.

Frequently asked questions

What is Anchorage Digital's requirement for wallets interacting with the blockchain?

Anchorage Digital requires the wallet to hold sufficient balance to cover transaction fees. This includes an estimated balance for withdrawals, staking, and smart contract operations, and a fixed "Fee threshold" for API-initiated transfers.

How are Ethereum gas fees calculated?

Ethereum gas fees are calculated by multiplying the gas limit (maximum gas a user is willing to spend) by the gas price (ETH amount a user is willing to pay per gas unit). They are paid in ETH and are used to protect the network and incentivize miners.

What is the required threshold for ERC20 and ETH transfers at Anchorage Digital?

As of January 24, 2024, the threshold for ETH is set to 0. ETH unless the gas station is used. The actual fee might vary depending on network conditions at the time of broadcast. When using the gas station, no minimum ETH is required.

What is required for withdrawals from a wallet at Anchorage?

A wallet must have an ETH balance equivalent to a calculated amount, which factors in gas limit estimates, multipliers for gas limit and price, and priority fees unless the transfer uses the Gas Station which does not require any ETH balance.

How does Anchorage Digital handle the MaxFee setting in transactions?

Anchorage Digital sets a MaxFee, the maximum fee they are willing to pay, ensuring users don't overpay but have enough for transaction processing. The priority fee is set to 0.01 Gwei.

Is there a way to avoid having dust in a wallet?

For ERC20 withdrawals and transfers, avoiding dust in a wallet is not possible due to the non-deterministic nature of gas required for interacting with these contracts. In theory, for ETH transfers, it might be possible to avoid dust by transferring out all ETH and specifying the maxFee and maxpriority fee in a way that uses up all ETH balances in a wallet. However, this functionality is not implemented on our platform.