Transaction Fees (Miner Fees) Definition

What are Transaction Fees?

Transaction Fees are the payment that the spender must include to every cryptocurrency transaction and which goes to the miner who mines the block includes that transaction.

Every crypto transaction must include a transaction fee. That fee goes directly to the miner who processed the transaction. Cryptocurrencies are designed to be a currency that cuts out all middlemen and organizations that would handle processing fees. Instead, crypto is peer-to-peer. This means that processing the transaction is also done by a “peer”. And their time and efforts are compensated in Bitcoin.

To accommodate this, the crypto spender ads extra of that token, known as the transaction fee to the transaction. The transaction fee cannot be more than the amount of the transaction itself.

How Fees Are Calculated

How much is a typical transaction fee? That depends. And like cryptocurrency itself, it depends on the supply and demand for block space. Typically, as the demand for block space raises, so does the price per transaction fee.

Also, if someone is willing to wait longer for their transaction to successfully be added to a block, they might pay less and wait longer. If they aren’t willing, they should pay more to receive the speed they wish for.

Fees even increase and decrease depending on the day of the week. It’s common for fees to rise as the weekend approaches and subsequently diminish during the beginning of a week.

Fee rates are another important factor in determining how fast a transaction will be confirmed. The fee rate is determined by the amount that the transaction pays, divided by the size of the transaction (vbytes).

For example, if a transaction pays 10,000 nanobitcoin in transaction fees, and the transaction size is 500 vbyes, the fee rate would be 20 nanobitcoins per vbyte.