Liquid’s Adoption of Dynamic Crypto Withdrawal Fees

Effective today, Liquid is changing how customers are charged for withdrawing cryptocurrency. We are adopting a dynamic model where the withdrawal fee is determined by the prevailing network transaction fees of the cryptocurrency that is being withdrawn from the exchange.  

The initial scope of this change will be ETH and ERC-20 tokens only.

How do Dynamic Withdrawal Fees work?

Liquid has developed the Dynamic Withdrawal Fee (DWF) system. A crypto withdrawal fee will consist of 2 components that are displayed transparently to users in both the withdrawal screen and via the API:

• Network Fee: this is dependent on prevailing blockchain network fees at the time the withdrawal is requested. In most blockchain networks, the prevailing network fee changes periodically based on available capacity and demand for confirming transactions on-chain
• Liquid Fee is a fixed fee that is set at about 3 USD equivalent to the cryptocurrency being withdrawn

Liquid users will be able to see the Network Fee + Liquid fee in the withdrawal screen so it is 100% transparent what is being charged. The amount of crypto that is being sent will also be displayed in the withdrawal screen at the point the request is submitted.

The network fee is fixed at the point of the withdrawal confirmation and will not change even if the network difficulty/fees change at the point the withdrawal is broadcast to the blockchain. Network transaction fees can spike during periods of congestion on the blockchain network. During the 2020 “DeFi summer” transaction fees often reached around 50 USD equivalent per transaction, more at peak usage times.

Which cryptocurrencies and networks are in scope?

Initially, the DWF method is applied to the Ethereum network, including ether (ETH) and ERC-20 tokens. Over time we plan to expand the scope of dynamic fees to other networks and tokens including Bitcoin. 

Initially Liquid will charge network or Gas fees in accordance with the “Standard” fee level. As a reference, Liquid utilizes the ETH Gas Tracker website: https://etherscan.io/gastracker.

For some cryptocurrencies, Liquid has waived withdrawal fees altogether including DASH, ZIL, and XLM.    

In what currency will you be charged for the withdrawal?

Both component fees (Network Fee + Liquid fee) will be charged in the currency being withdrawn. No need to worry about funding your account with the network protocol token, Liquid handles this in the back-end for users.

What are network fees?

Network or Gas fees on the Ethereum network refer to the unit that measures the amount of computational effort required to execute specific operations on the blockchain network. Since each blockchain transaction requires computational resources to execute, each transaction requires a fee to be paid to miners and validators. On the Bitcoin network, the network fee is a fee paid to the miners to validate the transaction and secure the network.  Gas refers to the fee required to conduct a transaction on the Ethereum blockchain successfully.

Why is Liquid doing this?

Clarity and transparency. Liquid made this change with the client experience in mind. The change to dynamic withdrawal fees is part of our focus on better serving Liquid’s users and business partners with a fair market & transparent pricing.

If prevailing network fees are high, Liquid users have the option to wait to do the withdrawal at a time when blockchain fees are lower thus optimizing costs.

There are ways to lower withdrawal fees, and it starts with understanding that the fees are based on the type of cryptocurrency you want to withdraw. Some blockchains have higher transaction costs than others. Another way Liquid has helped to improve accessibility is by developing our multi-chain initiative with 1 crypto supported via multiple networks. Some cryptocurrencies on lower-cost networks have low or no withdrawal fees. More information on our Multi-chain initiative can be found here:  Multi-Chain support at Liquid.

Will there be any change in service levels?

There will be no change to service levels as a result of the changed schema for charging for withdrawals.

Liquid sets its internal target service level of processing 90% of all crypto withdrawals in < 2 min without compromising on security.  

Does Liquid charge for crypto transfers between Liquid wallets?

Liquid waives all fees for crypto transfers between Liquid managed wallets.

Looking Ahead

We want to thank the entire Liquid community for their support over the years including through some big challenges we faced together in 2021. Looking ahead to 2022, we are working hard to offer new products including innovative derivatives, staking, and lending options all of which are designed to contribute towards our mission of democratizing finance with blockchain technology.