Transaction fees may seem intimidating but they really aren’t all that bad. All it takes to quickly understand how Bitcoin fees work is to take a look through a simple guide like this one!
What are Bitcoin transaction fees?
Aside from the cost of the actual digital coins, Bitcoin doesnt have a fee for exchanging and selling. Where the fees for buys and sellers come in, are the transactions fees. These fees are small amounts of money that you incur when you make any kind of currency transaction. These fees include Maker (which add to the order book liquidity through limit orders) and Taker (which subtract liquidity from an order book through market orders) fees. Transaction fees are important because they essentially fund the entirety of the Bitcoin network. The money used from your transaction fees goes directly to the Bitcoin miners who in turn use their computing power to process every transaction. Miners also play a critical role in maintaining network security. Without miners, the Bitcoin network would be attacked and would pretty much instantly fall apart. We will go over the role that miners play, a little later on.
How does my transaction work?
In order to understand why and how much you will have to pay, it’s important to understand how it works. The first step in the chain of events is that the transaction is checked by every computer that holds a copy of the Bitcoin blockchain (the official public ledger of all bitcoin transactions) for validity. The computers are called “Nodes” you have probably heard of them. The nodes quickly check Bitcoin’s transaction history to prove that you actually have the Bitcoins you want to spend. Next, after the transaction is labeled as valid, it then goes into the Mempool (short for Memory Pool). The Mempool is basically a waiting room where the transaction sits and waits for a miner to pick it up and put it into a block of transactions. Once a miner picks up the transaction and includes it in a successfully mined block the transaction is then technically “confirmed”.
What is a Bitcoin Miner?
Miners are the ones that do all the work of verifying the legitimacy of cryptocurrency transactions . They can be described as a kind of Bitcoin Auditors. The role of the miner was created by Bitcoin’s founder Satoshi Nakamoto, as a way to keep users honest and to prevent “double spending”. Double spending is basically when a Bitcoin owner illicitly spends a certain amount of coin, twice in a row. Once the miners have completed verifying 1 MB (megabyte) worth of bitcoin transactions, otherwise known as a "block," those miners are then eligible for their pay in Bitcoin.
How much are Bitcoin transaction fees?
At the moment, the average Bitcoin transaction fee is 25.68. Due to the recent surge in popularity of Bitcoin, the average price has gone up 1.51K% from one year ago.
So take those numbers will a grain of salt, because prices are always changing. The best way to answer this question is to say that the price actually depends on a few things. These include how busy the network is, and how large the amount of money you are sending is. The bigger the amount of money you want to send, the more time and effort that will go into processing the data.
And as far as time, you also some options. For example, If you’re in a hurry, you can decide to pay a fee that is a bit higher, and your wait time for your transaction validations could be as low as 5 to 10 minutes. This is because when you pay that extra little fee, your request gets pushed closer to the front of the queue. But, if you’re not really on a time crunch and don’t mind a 10-30 minute wait time, your fee would be much smaller. So in a nutshell, your fees will vary, depending on the amount of traffic and the relative price of bitcoin
It is true that the average fee for Bitcoin transactions can spike sharply during periods of lots of traffic on the network. One example of this was during the 2017 Crypto boom where the average fee reached nearly 60 USD.
Calculate the fee yourself
And if you’re still in need of some transparency, here is a table of the equation if you prefer to do the math for yourself and get an exact estimate of what your fees would be!