What is the transaction/tax fee in coins & tokens? How does it affect?

Some call it “transaction fee”, some call it “tax fee”. What is the transaction fee that we encounter with some coins and tokens?

What should we pay attention to when buying and selling cryptocurrencies with this feature? Does the tax fee really work?

You can find answers to such questions about tax fee in this article.

What is tax/transaction fee in crypto coins and tokens?

Tax fee is not available in every coin and token. Only some coins use this feature.

This feature can be embedded in smart contracts of cryptocurrencies. A certain rate (1%, 5%, etc) is determined. Each transaction (purchase-sell-transfer) is deducted at this rate.

What is the transaction/tax fee in coins & tokens? How does it affect?

Where these deductions will be sent and how they will be used are at the discretion of the project owners.

In fact, how to apply this tax fee is entirely under the authority of the project/coin owner. Therefore, it may differ for each coin and token.

This tax fee is especially heavily used in meme coins in the BSC network. Some projects impose tax fees as high as 40%- 80%.

It is very important to know whether the coin you are trading has a tax fee. You have to consider the tax fee when setting the slippage rate on DEXs.

You may be interested: What is slippage tolerance in crypto? How to adjust slippage tolerance at Uniswap and Pancakeswap?

Usage Areas of Transaction/tax Fee in General

Each coin is used for different purposes. However, tokens generally use these tokens as follows:

  • Distribute holders: Some of the collected tax fees are distributed proportionally to all holders.
  • Reward pool: Some of the tokens received as tax fee and another coin (BNB, BUSD, ETH, etc) are taken. And these coins are distributed proportionally to the holders.
  • Burn: Some of the tokens cut as a tax fee are burned.
  • Add liquidity pool: Tokens deducted as tax fee are added to the liquidity pool.
  • Marketing and dev wallet

Purposes of Transaction/tax Fee:

  • Encouraging investors to hold tokens.
  • Creating resources for areas such as marketing and development.
  • To discourage holders from selling:
Usage Areas of Transaction/tax Fee in General

In particular, some projects impose separate tax fees on selling and buying transactions: They apply a higher tax fee to the selling transaction and a lower tax fee to the buy transaction. Thus, they encourage purchase.

There are projects that put 40% – 80% tax fee on the selling. Does this tax fee work?

I observed some projects that set up a 40%-80% selling tax fee on the first day of launch. Projects tried to prevent selling. Did they achieve?

These projects ran into something they didn’t expect. A tax fee of 40% makes it very difficult to transact. It is nearly impossible to trade with 80% selling tax.

I observed some projects that set up a 40%-80% selling tax fee on the first day of launch. Projects tried to prevent selling. Did they achieve?

These projects ran into something they didn’t expect. A tax fee of 40% makes it very difficult to transact. It is nearly impossible to trade with 80% selling tax.

So many people are starting to think that there is a problem with the smart contract (honey pot, etc) or that the project owners are scammers. Especially new investors think like that.

After a while, FUD spreads because everything moves so fast in the crypto space. People want to sell their tokens and exit the project, even at a loss.

SteamX set 40% selling tax for the first day of launch. GameologyV2 set 80% selling tax fee for the first day of launch. Both of them filled the hardcap and had hype. Selling tax fee didn’t work, lost their hype.

In addition, project owners cannot achieve success with tax fees. It’s a very simple thought.

Easily bought and sold is an advantage for a coin.

Come on, we are in the crypto space. “Decentralized, freedom space”. You can’t control people via tax fee.



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