On November 24th, 2019, a whale (an account with substantial amount of cryptocurrency) moved 44,000 Bitcoins to another address. This $310 million transaction only cost $0.32 in fees.
What are Bitcoin Transaction Fees?
All Bitcoin transactions have an additional fee attached. Miners on the blockchain, process and verify transactions and are compensated with block rewards and transaction fees. In short, transaction fees pay cryptocurrency miners to process transactions.
How are transaction fees calculated?
Transaction fees are dependent on transaction size and network congestion. If there are many unconfirmed transactions (the network is congested), the network fee for a speedy transaction will increase. Miners decide which transactions to include into the next block by prioritizing the highest transaction fees. During periods of high congestion, transactions can take hours and days to confirm if transaction fees aren’t high enough.
Additionally, transaction fees are dependent on the size of the transaction (bytes). The transaction size determines how much space the transaction will utilize in the block, the bigger the transaction the higher the fee. Transaction size is dependent on the number of inputs and outputs a transaction has. The greater the inputs and outputs the larger the transaction is. These inputs and outputs occupy a different about of bytes depending on if the transaction type is Legacy or SegWit. In short, SegWit improves upon the current blockchain, creating smaller transactions as well as increasing block capacity. In turn, transactions using SegWit addresses are substantially cheaper than transactions between Legacy addresses.
Bitcoin Historical Fees
Although fees will vary, Bitcoin transaction fees have always been cheaper than traditional wire transfers. As mentioned before, network congestion plays a substantial role in network fees. During the Bitcoin pump of late 2017, BTC fees peaked at an all-time high of over $35, and again from $0.15 to $2.00 during the past year when BTC jumped from $3,000 to over $8,000 over the short span of a few months. As of writing this article, the next block (<10 minute confirmation time) fee is $0.48 per transaction.
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