Transaction Fees

Every Bitcoin transaction can include a fee — an amount the sender voluntarily adds above the transferred value. That fee goes entirely to the miner who includes the transaction in a block.

Nothing goes to Satoshi. Nothing goes to a company. Nothing goes to the Bitcoin Foundation or any governing body. The fee is a direct payment from sender to the miner who does the work of including the transaction in the permanent record.

Fees are denominated in satoshis per virtual byte — a measure of transaction size rather than transaction value. A transaction sending $1 million costs roughly the same fee as a transaction sending $10, assuming they’re similar in data size. This is counterintuitive but logical: the cost of including a transaction is determined by how much block space it occupies, not how much value it moves.

How fees are set:

Wallets typically offer fee rate options — fast, medium, slow — corresponding to different sat/vbyte levels. A higher fee rate gets picked up by miners sooner. A lower fee rate may wait longer for a period of lower mempool congestion.

During quiet network periods, fees can be very low — fractions of a cent for a standard transaction. During periods of high congestion, fees can rise significantly.

Why fees matter for Bitcoin’s long-term design:

Currently, miners are primarily compensated by the block reward — newly created Bitcoin. But block rewards halve every four years and will eventually reach zero around 2140. At that point, transaction fees become the only miner compensation. Whether fees will be sufficient to secure the network is one of Bitcoin’s genuinely open long-term questions.

Tomorrow: transaction confirmations — what it actually means for a transaction to be final.

— The Daily Bit