When it comes to getting into the crypto trading sector, one of the big concerns many people have is this: “How do I make sure that my $3,000 worth of Bitcoin is not going to disappear once I hit the ‘send’ button to an exchange or wallet?”
I know how you feel because I’ve been there too.
And 4 years later I STILL experience those feelings the first time using a new service, wallet or address. Firstly, it’s good to have a basic ‘layman’ understanding of what is involved when transferring ‘crypto’ and some of the key differences between cryptocurrencies.
How is crypto transferred from one location to another?
There are two main types of transfers;
- Internal transfers: moving cryptocurrency from one location to another within the SAME platform and;
- External transfers: moving cryptocurrency from one ‘wallet’ to another.
We won’t be covering trading or exchanging here (ie. swapping one crypto for another), only transferring crypto.
Internal crypto transfers
In some exchanges you can transfer crypto from one place to another internally; some have different ‘wallets’ or ‘accounts’ for different things. For example, OKEX have a ‘funding account’ and a ‘trading account’ while Binance have wallets for various purposes that you can transfer to and from.
If you’re familiar with other platforms, you'll find they often have various internal accounts/wallets that you move rewards between, each of which have different functionality.
In most cases, these are simply containers used to keep things separate and make it easier for you and the technology to manage. Any transfers here are carried out internally by the technology or platform, not on a public blockchain.
In traditional banking, you could think of this as moving funds between your accounts within the same bank eg between your checking and savings accounts.*
External crypto transfers
An external transfer (or ‘normal' transfer) is when you move crypto from one address to another address.
For example, you may wish to transfer funds from an exchange to a private wallet or to a different exchange. Or from one private wallet to another wallet/location.
Below is an example of an external transfer from an exchange wallet.
First, the exchange must approve the withdrawal. In theory, this should be fast but some exchanges can be incredibly slow &/or ask for additional verification before they send the funds.
Then, the transaction is sent to the blockchain.
If you were to send from your own wallet (instead of from an exchange) the process would likely be faster because it does not have to pass any third-party verification before being released.
These transfers are ultimately carried out on the blockchain, with transactions being logged and verified by various computers.
Depending on the blockchain being used, you’ll need ‘account' details for the transfer. As a minimum, this will be a long string of text and numbers; a wallet address. Extra care should always be taken for external transfers as funds can get lost.
In a traditional banking, this is similar to transferring funds from your bank account to someone else's.*
* These are very crude & not accurate! Take with a pinch of salt 😉
What are blockchain networks and protocols?
This is far too big a subject to cover here, however what you need to know is that there are various networks or protocols. Some popular ones are;
- Ethereum (ERC20 tokens)
- Tron (TRC20 tokens)
These networks all have their differences and some tokens/coins have the potential to be transferred via more than one network eg. USDT (Tether) have the ability be transferred via Ethereum or Tron network, however this can only if the network is supported by the sending and receiving address (ie the wallet or exchange).
Network fees and speeds
Networks have different fees and speeds. Bitcoin has ‘mining’ fees and Ethereum ‘gas’ fees. These fees relate to the computational power required to process the transaction.
One thing to note is that there can be MASSIVE difference in Ethereum gas fees and these gas fees effect all tokens that rely on ERC20 network. This is caused by congestion – the more congestion, the higher the fees. This problem is being worked on and solutions should be available Q3 of 2021.
What is Gwei?
Many cryptocurrency tokens use ERC20 and so it's worthwhile having some understanding of Gwei, the unit used to measure ERC20 gas costs…
Gwei is short for gigawei, or 1,000,000,000 ie. 1 Gwei = 0.000000001 ETH (nine decimal places)… or 1 ETH= 1,000,000,000 gwei (nine zeros!). As you can imagine, it's much easier to say your gas cost is 10 Gwei, than 0.000000010 ETH!
Another related thing to note is ‘confirmations. Exchanges and platforms can have differing requirements in terms of how many network confirmations they require to consider the transaction final. These confirmations are public and can be seen on the blockchain.
Your crypto is your responsibility
I’ll touch briefly on security and cover it more in another post, however one thing to note about crypto is that with great power comes great responsibility. You have total control, however you don’t have a central bank to phone if something goes wrong
In most cases, after a transaction is sent it cannot be retrieved eg if you send something to the wrong address there is a good chance it is ‘lost’ forever.
8 Beginner tips for transferring crypto safely & cheaply
Here are 8 tips to make sure your crypto is hitting the right address every time, and also a few tips to avoid huge ‘gas’ fees.
- Double-check the coin/token name that you are about to send. Many crypto have similar names and if you’re sending from an exchange, you might just have traded the wrong thing. One big one is USDT (Tether) and TUSD (TrueUSD) – their ticker names USDT and TUSD could easily be mixed up.
- Double check the address you are sending to. Always use the copy function (never try to type an address). As a minimum, look at the first 6 digits and the last 6 digits to ensure the address is entered correctly.
- Double check the network you are sending FROM and TO. For example, if you try to send USDT via the Tron TRC20 network to an address that only accepts ERC20, your funds will probably be lost.
- Test with the bare minimum. Before sending any big amount of ETH or BTC from an exchange like CoinBase or Binance to your wallet, start with sending the bare minimum that the exchange allows you to first. That way, you can rest assured that if your transfer is lost, your loss is relatively low.
- Check the blockchain explorer. Most exchanges will provide a link to look up your transfer to track your transaction on the blockchain. Alternatively, you can look at BlockExplorer.com if you are transferring BTC or Etherscan.io if your coin is on the Ethereum blockchain. Check your transaction number in either of these sites and you will see the transaction taking place so you’ll know that your crypto is safe and sound when you see it IS being deposited in the correct address of your wallet.
- Check the gas fees. Ethereum and Ethereum-based tokens are very popular. Fees are paid in ETH to ‘miners’ who are working to make sure that all blockchain transactions are secure. You will always have to pay a gas fee, but the best way to avoid the higher gas fees is by going to gasnow.org and check out the gas fee. UPDATE: GasNow tool has now closed. Try; EthGasStation, EthGasWatch, EtherChain or ethereumprice.org/gas.
- Avoid peak travel. In order to avoid paying big transaction fees, it’s best to always create a transaction when network congestion is at its lowest, which I find is usually on the weekend or early in the morning (UK time). Some wallets even allow you to input settings and wait out the lowest fees available to complete your transaction. You can also see ETH gas fee charts here: https://ethereumprice.org/gas and get a good idea if the time is good or bad relative to recent levels of congestion.
- Use a cheaper network if option is available. As mentioned previously, sometimes tokens can be transferred via other networks. This can seem complicated at first, however all you need to do is ensure the send address and receive address are on that network. One example is sending USDT (Tether); some exchanges give you the option to send via Tron, TRC20 network which is much cheaper and faster than the Ethereum network….the other advantage of this is that you can send a tiny transaction as a test, because fees are virtually zero!
As a new crypto trader, it is essential to keep all these tips in mind when you begin this journey and take your time.