How Bitcoin Transaction Fees Work
Bitcoin transaction fees are payments made to miners who process and confirm transactions on the Bitcoin network. Unlike traditional payment systems with fixed fees, Bitcoin fees are determined by supply and demand for block space.
Every Bitcoin block has a maximum size of about 4 million weight units (roughly 1-1.5 MB of transaction data). When more people want to send transactions than can fit in the next block, fees increase as users compete for limited space.
How Fees Are Calculated
Bitcoin fees are measured in satoshis per virtual byte (sat/vB). The total fee you pay depends on two factors:
- Fee rate (sat/vB) - How much you pay per unit of data. Higher rates get confirmed faster.
- Transaction size (vBytes) - How much data your transaction uses. More inputs and outputs = larger size.
Total Fee = Fee Rate (sat/vB) x Transaction Size (vBytes)A typical transaction with 1 input and 2 outputs is about 140 vBytes. At 10 sat/vB, that costs 1,400 sats (about $1.40 at $100k BTC).
Why Fees Vary So Much
Bitcoin fees can range from under 1 sat/vB during quiet periods to over 500 sat/vB during extreme congestion. Several factors affect fee levels:
- Network activity - More transactions competing for space drives fees higher
- Time of day - Fees often drop during nighttime hours (UTC) when fewer people are transacting
- Market volatility - Price swings cause trading activity spikes
- Ordinals/Inscriptions - NFT-like assets on Bitcoin can consume significant block space
- Exchange movements - Large exchanges consolidating UTXOs can temporarily spike fees
SegWit and Fee Savings
Segregated Witness (SegWit) is a Bitcoin upgrade that reduces transaction sizes by separating signature data. Using SegWit addresses (starting with bc1) provides significant fee savings:
- Native SegWit (bc1q...) - ~38% smaller than legacy transactions
- Taproot (bc1p...) - Even more efficient for complex transactions
- Nested SegWit (3...) - ~26% smaller than legacy, but less efficient than native
Always use wallets that support native SegWit or Taproot addresses to minimize your transaction fees.
Understanding the Mempool
The mempool (memory pool) is where unconfirmed transactions wait before being included in a block. Think of it as a waiting room - transactions with higher fees get processed first.
When the mempool is nearly empty, even low-fee transactions confirm quickly. When it is congested with thousands of transactions, you need higher fees to get priority. Our congestion indicator shows the current mempool state.
Fee Strategies
Choose your fee based on how urgently you need confirmation:
- Fast (1-2 blocks) - For time-sensitive transactions. Pays a premium for next-block inclusion.
- Medium (3-6 blocks) - Good balance of speed and cost. Usually confirms within an hour.
- Slow (6+ blocks) - For non-urgent transfers. May take several hours during busy periods.
- Economy - Lowest reasonable fee. Use when you do not care about timing.
Frequently Asked Questions
What is sat/vB?
Sat/vB stands for satoshis per virtual byte. It is the unit used to measure Bitcoin transaction fees. One satoshi is 0.00000001 BTC. Virtual bytes (vBytes) measure transaction size, accounting for SegWit data discounts.
Why is my wallet showing different fees?
Wallets use different fee estimation algorithms and data sources. Some are more conservative (recommend higher fees), while others aim for lower costs. Our estimates come directly from mempool.space, which analyzes actual mempool data.
Can I speed up a stuck transaction?
Yes, through two methods: RBF (Replace-By-Fee) lets you rebroadcast with a higher fee if your wallet supports it. CPFP (Child-Pays-For-Parent) creates a new transaction spending the unconfirmed output with a high fee, incentivizing miners to confirm both.
What happens if I set the fee too low?
Your transaction will wait in the mempool until fees drop or eventually be dropped after about two weeks. Most wallets let you increase the fee (RBF) if this happens. Never set fees below the minimum relay fee (usually 1 sat/vB).
How does transaction size affect fees?
Larger transactions (more vBytes) cost more at the same sat/vB rate. Transactions with many inputs (e.g., consolidating small amounts) are larger. Batching multiple payments into one transaction is more efficient than sending them separately.
When are fees lowest?
Fees tend to be lowest on weekends and during night hours (UTC). Monitoring fee trends and timing non-urgent transactions for quiet periods can save money. Some wallets offer fee scheduling features.
How do Lightning Network fees compare?
Lightning Network fees are typically under 1 satoshi for most payments, regardless of amount. For small or frequent transactions, Lightning is dramatically cheaper than on-chain Bitcoin transactions.
What is the minimum Bitcoin fee?
The minimum relay fee is typically 1 sat/vB, but transactions at this rate may take days to confirm during busy periods or may never confirm if they get purged from the mempool. Most wallets set a practical minimum around 2-5 sat/vB.
Skip the Fees
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