💡 The Plain-English Definition
Fee is the total amount of bitcoin paid to get a transaction into a block. Feerate is the fee per unit of transaction size, measured in satoshis per virtual byte (sat/vB). Miners care about feerate, not the total fee. A small transaction paying a high feerate gets confirmed ahead of a large transaction paying a higher total fee.
🤔 But Why Though?
Miners have limited block space — about 4 million weight units per block. To earn as much as possible, they fill it with the highest-earning mix of transactions, like packing a suitcase with the most valuable items per kilogram. Say one transaction weighs 250 vB — virtual bytes, the standard size unit since the 2017 SegWit upgrade — and pays 2,500 satoshis: that’s a feerate of 10 sat/vB. Another weighs 500 vB and pays 4,000 satoshis: a feerate of 8 sat/vB. Even though the second pays more in total, it earns the miner less per unit of space, so the miner includes the first one first.
So setting a fee correctly means knowing your transaction’s size, which depends on its type. A simple one-input, one-output Legacy transaction — using the original address format starting with 1… — might weigh 250 vB. The same transaction using Native SegWit addresses (starting with bc1q…) might weigh 140 vB, smaller and therefore cheaper at any given feerate. A transaction with many inputs — many UTXOs, the unspent chunks of bitcoin you hold — weighs more and costs more at the same feerate. Good wallets work all this out for you, estimate the right feerate from current mempool conditions, and show you the total fee to approve before broadcasting.
🌍 The Real-World Analogy
Think of miner selection like a cargo airline making the most of its payload. The airline earns per kilogram of cargo, not per package. A 1kg package paying £20 is worth more to it than a 3kg package paying £30 — the second pays more in total, but the first earns more per kilogram of limited space. Miners work the same way: feerate, the payment per unit of space, sets priority, not the total fee.
⚡ So What?
Understanding feerate explains why your transaction can sit unconfirmed even though the total fee looks reasonable — if the feerate is too low, miners fill their blocks with better-paying transactions first. It also explains why consolidating many small UTXOs into fewer larger ones — combining them in a quiet-fee period — pays off later: fewer inputs mean smaller transactions, which mean lower fees at any given feerate.
