What are the avoidable fees and Non-avoidable fees in DeFi?
Another great question!
It is one of the top 3 reasons people lose money in DeFi. Transactions in DeFi are not free. Also, the higher the demand for Ethereum, the more expensive gas fees get, and many investors are not aware of this.
So in today’s post, we will deep dive into the two types of fees available in the DeFi ecosystem — avoidable and unavoidable fees.
Avoidable fees are settlement, layer one, or consensus fees. These fees can be reduced. For example, gas fees on Ethereum transactions can be reduced by using a wallet that optimises for DeFi gas prices.
Non-avoidable fees, on the other hand, are inherent to DeFi protocols and can’t be avoided. For example, when you’re lending, borrowing, providing liquidity, or swapping on a DeFi platform, you’ll always have to pay interest or fees to perform these transactions.
So, which type of fee is more important to keep in mind?
In general, avoidable fees are more important because they’re under your control. By reducing your avoidable fees, you can save money over time.
Non-avoidable fees, while important, are less within your control. But, it’s still important to be aware of them to factor them into your DeFi strategy.
In DeFi, it’s essential to be mindful of both types of fees to make the most out of your investment. Focus on reducing your avoidable fees so that you can make your DeFi experience more profitable and efficient.