Bitcoin transaction fee

Sometimes you can hear that Bitcoin transactions are free, or “almost” free. What is the truth?

Why transaction fee?

We already talked about the Bitcoin network with nodes that searches for new blocks and confirms Bitcoin transactions. Each new block is rewarded by 25 Bitcoins. This is nice motivation to keep the network alive. In the future the reward will be lower and lower and lower (it will be halved every 4 years so in 2017 will be the reward decreased to 12.5 Bitcoins). How to reward miners in the far future? How to prevent somebody from sending 0.00000001 Bitcoin to milion addresses just because of fun? How to motivate the mining nodes to process your transaction as soon as possible? A reasonable transaction fee should solve all of these issues. If you send your Bitcoins to another address a transaction fee may be required. It is mandatory for amounts smaller than 0.01 Bitcoin, in this case a fee of 0.0001 Bitcoin is demanded. Any amount larger than 0.01 should be processed and confirmed for free but it might also freeze in a queue forever without being ever processed… Another factor is the age of Bitcoins that are transferred and overall complexity of the transaction. The miners prioritize transactions with older Bitcoins and with lower number of inputs and outputs. The exact behavior is a matter of Bitcoin protocol implementation and is beyond this article. The fee rules might slightly change with each release of Bitcoin software. As the value of Bitcoin grows, is the fee getting slowly lower. What is now reasonable fee? Well, again, it depends. It is a part of a concrete implementation. You should count with 0.0001 Bitcoin for a typical transaction. It might be more but this is a usual amount for a fee – no matter how much Bitcoins do you send.

Keywords

Bitcoin transaction fee, Bitcoin fees, Bitcoin transaction fees

 

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