Bitcoin has become a popular means of transferring funds over the Internet, and it is especially beneficial for international payments because it is widely known that the processing fees are very low. But if you’re looking to invest in BTC or you want to accept BTC payments, it is very important to learn more about Bitcoin transaction fees and the blockchain network which powers the digital cryptocurrency.
In this article, we explain more about Bitcoin transaction fees and why they matter to the Bitcoin ecosystem.
Bitcoin Mining
Bitcoin mining encompasses verifying blocks of transactions on the network, and the main results of the mining are new BTC that are created via mining; and also, this solves the double-spending problem and keeps the networks safe. But the task isn’t very simple because miners need to solve a computational harsh in order to add a block of transactions to the network, and that requires a lot of computing power and energy.
What’s more, in order to get the financial reward, the miner must be the first one to solve the hash. Here it should be noted that one block of the transactions is 1 MB in size. The financial rewards that make mining profitable include block reward and transaction fees—currently, the block reward is set at 6.25 BTC.
The Transaction Fees
Because Bitcoin halving decreases the reward of the miners, the transaction fees are a very important incentive as well when it comes to Bitcoin mining. And, as we know, without mining, the network will stop operating. In case you want to get BTC today, there are actually much easier options, including online trading.
For example, there are automated trading systems like bitqs that utilize AI-driven algorithms which make it easier for new investors to invest in BTC. The trading system relies on high-quality technology in order to provide a safe and beginner-friendly trading environment. The minimum deposit to start trading on the platform is only $250.
As we mentioned before, the transaction fees on the network are generally low. But this actually depends on several factors, including the conditions in the network and the priority of your transaction. As you know, each block of the transaction can only be 1 MB in size. Hence a limited number of payments can be included in one block.
If there is an increased number of users on the network, then transactions that are also associated with higher fees are the first ones to be added to the block of transaction. To be more specific, each transaction is first included in the so-called mempool, where miners choose which transactions to add to the block of transactions.
The Size of the Block of Transaction
Another factor that impacts the transaction fees is the size of the transaction. Smaller transactions are easier to verify on the network. Plus, they don’t take as much space as larger transactions. Therefore, for larger transactions generally, you need to pay higher fees because they require more computing power and time to be added to the blockchain network. But, luckily Bitcoin wallets typically have features that allow the wallet to calculate the transaction fees based on the conditions on the blockchain system and your transaction.
21 Million BTC
Because the number of BTC is restricted to 21 million by Satoshi Nakamoto after the last Bitcoin is mined, there won’t be a block reward as part of the financial incentive for miners to mine on the network. This means that the transaction fees will rise as a result because, again, it’s the miners that are crucial for processing the blocks of the transactions of the network. It’s also worth mentioning that the average processing time of the transaction is 10 minutes, so again, this is very appealing to most business owners or investors who don’t want to use BTC.
