What Are Bitcoin Transaction Fees?
The current Bitcoin transaction fee is not necessarily a mandatory fee that you have to pay when you transact using Bitcoin. However, if you want your actual transaction to be processed by a miner, then you will have to pay a fee to guarantee this. If you don’t pay transaction fee bitcoin, then it is entirely possible that your transaction will be delayed.
This isn’t down to some regulatory authority that oversees Bitcoin transactions within the blockchain. The Bitcoin fees that hold sway over the decentralized market come down the demand within the blockchain and what users are willing to pay in order to get their transaction pushed through and added to the next block.
Keep in mind that miners are the ones that verify all transactions within a block. It is their computational power that allows them to verify transactions and add new blocks to the overall blockchain. When a miner completes a block, the individual is rewarded with Bitcoin (12,5 BTC). Over and above the flat rate rewarded to them are the transaction fees paid to them within that block.
Due to this, miners will prioritise transactions which have relatively high transaction fees attached to them as opposed to verifying payments with no transaction fees. Miners do not need to verify payments in chronological order and as such, makes more sense to verify transactions with high fees. Due to the prioritisation of transactions with higher fees, it means that you are more-likely going to need to pay a fee if you want your transaction to be verified within a reasonable time.
Factors Affecting Bitcoin Fees
As we have outlined, you don’t necessarily have to pay a Bitcoin transaction fee. However, those transactions with higher-than-average fees are more likely to be included in the next block, while average fees are likely to be included in the next 1-3 blocks, and lower-than-average fees might not be included at all. So, what affects the rate of Bitcoin fees at any given moment? There are two main factors at play; the network conditions and the transaction size.
To understand why network conditions come into play, it’s important to look at the size of a block in the blockchain. One block can only contain 1MB of data. As such, there is a limit to the number of transactions that can be included in any given block. When there is a high level of blockchain activity, there are more and more transactions awaiting confirmation.
When a transaction is broadcasted, it does not go directly into the next available block. Transactions will arrive at the memory pool. It is here that miners decide which transactions to prioritise and include in the upcoming block. If the network is busy, miners will prioritise those transactions which have higher network fees.
If the memory pool is full, users within the pool will start to compete with one another in what can be described as a bidding war. This increases the Bitcoin fees for transactions at that given moment. As users hope to be included in the next block, the network fee Bitcoin will increase dramatically until it hits a max equilibrium fee.
At this point, miners will then work through the pool and assess which users are willing to pay the maximum fee for their transaction to be verified. Once traffic within the blockchain has decreased, Bitcoin fees drop again.
You’ll find that the size of a transaction will also determine the Bitcoin fees that will need to be paid. A Bitcoin fee estimation of smaller transactions will be lower than the Bitcoin TX fee of transactions that are larger in size. Again, this comes down to the fact that the size of a block is only 1MB. As such, validating larger transactions is more time-consuming and will take up more space within the block.
Therefore, miners prefer to verify smaller transactions as they take up less space and are much easier to validate. Logically, this means that larger transactions will incur a higher fee. If you are ever unsure of the fee that you might have to pay as a result of your transaction, you can always use a Bitcoin network fee calculator. These can be found on the internet and will calculate the given fee for a transaction.
Bitcoin Transfer Fee FAQ
Q1. Why must I pay a fee if miners are paid a flat rate?
You might feel that it isn’t entirely fair that miners receive a flat rate for mining blocks and get to keep the transaction fees from all the transactions within the block that has been mined. However, it’s important to remember that the flat rate reduces over time. Initially, miners received 50BTC to verify and complete a block within the blockchain. Every time 210,000 blocks are completed, the flat fee for mining a block is halved.
Thus, the rate was halved meaning 210,001 blocks had been completed, and once again when 420,002 had been mined. Thus, the flat rate sits at 12.5 BTC which is down three quarters. The reason for this is that there is a cap on the amount of Bitcoin in circulation. As the flat rate for mining falls, it’s meant to slow the speed at which new Bitcoins are created. To offset this, transaction fees have been put in place to incentivise miners to continue working on the blockchain well into the future.
Q2. How can I change my recommended Bitcoin fee?
For the most, you’ll find that Bitcoin wallets constantly assess the blockchain’s activity level. As these wallets assess the current activity, it will give you a recommended Bitcoin average transaction fee. The recommended fee should be serviceable all the time.
However, you can change your recommended fee within your wallet – especially at times when you would like your transaction to be included in the next block. We recommend that you only do this if your transaction is urgent!
Q3. Where can I use a Bitcoin fee calculator?
It is wholly possible that the Bitcoin wallet you use does not have an automatic Bitcoin fee calculator. In this case, you’ll need to use a Bitcoin fee estimator that tracks the current activity within the blockchain and provides you with a recommended fee. You’ll find that there are a number of different resources on the internet that advertise Bitcoin fee estimation services.
We’ve found that there are a wide range of differing accounts as to which Bitcoin fee calculators are best. We hope to bring your attention to the fact that all online prediction tools will claim to be the most accurate. Find one that works for you if you need be. However, use your Bitcoin wallet if at all possible. To see a provider with low fees, have a read of our Zeply review.
Q4. Is it complicated to calculate Bitcoin transaction fee?
No, it is not complicated as you don’t have to do this with pen and paper, so to speak. You can use a number of different online resources which will provide you with a Bitcoin transaction fee chart and the ability to track the network fee Bitciin. Be sure to use a reliable resource and do not overcompensate when it comes to paying Bitcoin fees – particularly if the fee is disproportionate to the amount of Bitcoin you want to buy, sell, or transfer.
Q5. Can I choose not to pay a Bitcoin fee?
Yes, you are able to decide that you do not want to pay a fee for the transaction that you have requested. There’s no set fee for Bitcoin payments. However, you’ll find that your transaction might not be processed at all if you opt out of paying a Bitcoin recommended fee via your Bitcoin wallet. If this is the case, then your transaction may sit idle in the memory pool and won’t be picked up because there’s no incentive for miners to verify the transaction.
You can always accept new Bitcoin fees if this doesn’t happen. If you need to complete a Bitcoin transaction quickly, then we advise you to make sure that you do accept the recommended Bitcoin fee. It’s possible to implement higher-than-average fees for one particular transaction in the case that you want that transaction to be verified in the very next block.
What Next For Bitcoin Fees?
When you look at Bitcoin fees in comparison to that of fees charged by traditional financial institutions, you’ll find that Bitcoin fees are not necessarily that high. This is especially true when users make international payments using Bitcoin. The speed at which payments can be verified and currency transferred is of great achievement. Coupled with the fact that the fees associated with these types of payments are low, Bitcoin has a price-efficiency and overall efficiency advantage. The heart of the matter has more to do with the cost incurred when transacting smaller amounts.
Lightning Network improves Bitcoin fees
The Lightning Network is a ‘Layer 2’ payment protocol which is being used to solve the issue of scalability within the blockchain. This protocol is able to facilitate micropayments to a greater extent all the while reducing the overall fee associated with these smaller transactions.
The throughout of Bitcoin has increased exponentially as a result. The function of the Lightning Network is to enable Bitcoin nodes to open up payment channels which are bidirectional. These payment channels are able to interact an unlimited amount of times with one another and then close up once all transactions have taken place. Instead of each individual transaction within these channels being broadcast to the blockchain, it is only the opening and closing of the channel that is broadcast.
What this means is that all the transactions within the channel are essentially “off-chain” and do not need to be verified as has been the case in the past. This means that smaller transactions can be verified instantly and will incur very low fees. The only issue with payments made via the Lightning Network is that the overall security is not nearly as tight-knit as is the case on the blockchain. Payments made “off-chain” are more at risk of being diverted or accessed by hackers. This is why Lightning Network is determined to focus on micropayments – something which will stand Bitcoin in good stead as it enters more and more traditional markets and industries.
Bitcoin Network Fee Conclusion
If you wish to transact using Bitcoin, it is more than possible that you will need to opt for paying Bitcoin fees in order for your transaction to be prioritised by a miner. If you do not wish to pay Bitcoin fees, then you will have to put up with longer transaction times. This isn’t necessarily set in stone but miners are far more willing to verify transactions that they will be compensated for. As such, you are bound to incur Bitcoin fees when enacting a transaction.
Bitcoin fees are relatively low when compared to traditional financial fees. However, the fees associated with smaller transactions sometimes outweigh the cost-effectiveness of using Bitcoin. This is something that is bound to change as Bitcoin becomes more accepted within the sectors of society that we have come to live in. With advancements in Bitcoin’s Lightning Network, this change is inevitable and sure to come to the fore in coming years.
Bitcoin Fees FAQ
👉What is the latest Bitcoin transaction fee?
You’ll find that average Bitcoin transaction fees can change drastically, especially when the site is congested. As such, you must always take note of the transaction fee that you will incur when you make a Bitcoin transaction. You certainly do not want to incur a large fee if your transaction isn’t urgent. This fee will change constantly. We recommend that you take a look at our coverage at TradersBest.com to find out more about the latest Bitcoin fees and when to look out for them. Keep in mind that fees aren’t compulsory but do guarantee that your Bitcoin trading transaction will be mined.
💻Why are Bitcoin fees so high?
Bitcoin fees tend to change constantly. As such, you can never be too sure as to how much money you will have to spend when making a Bitcoin transaction. If you are unsure, you should double-check before engaging in any type of transaction. Bitcoin fees will shoot up when there is a high demand for block space. In times like this, you’ll pay far higher fees than if there is no demand for the current block space. A block can only have so many transactions. As such, you’ll be best off making a transaction when the demand for block space is low. To find out more about the associated Bitcoin fees, head over to our coverage at TradersBest.com.
🔐What is the average Bitcoin transaction fee?
At the time of writing, the average Bitcoin fee is nestled in the mid-20s (in dollar terms). However, this changes on a constant basis and it’s best to review the latest average Bitcoin fee prior to buying or selling Bitcoin. You’ll incur a fee for moving your Bitcoin from one wallet to the next, too. As such, we always recommend that you find out what the fee is for cryptocurrencies and act based on that information. If the Bitcoin fee is too high and you wish to transfer a small value of Bitcoin, it doesn’t make much sense.
📌What is the recommended Bitcoin fee?
You’ll find that there are a number of recommended fees on the internet. However, there is no one base-level fee that is attached to Bitcoin fees. Bitcoin fees are ever-changing and it’s based on the activity and number of transactions in a block. The higher the demand for transactions to be verified by Bitcoin miners, the higher the Bitcoin fee will be at the given moment. Having said that, the Bitcoin recommended fee will be given to you as a bitcoin wallet transaction fee. You can change your recommended fee at times when demand is higher.
📈Is the Bitcoin minimum transaction fee always the same?
No, there is no predetermined minimum Bitcoin fee. Unfortunately, this changes on a daily basis and you can’t bank on paying a small minimum Bitcoin fee today if it was low yesterday. Bitcoin fees tend to increase dramatically when there is a high demand for transactions to be verified. We urge you to keep track of the daily Bitcoin transaction fee before you make any type of transaction using Bitcoin.