When Bitcoin is transferred from one address to another, Miners are awarded a small Transaction Fee, which the sender has to cover. While most traditional banks charge a set fee for a domestic and international wire — around $10 and $20, respectively — the same can't be said for Bitcoin: What you pay is determined by several factors.
What Are Bitcoin Transaction Fees?
Bitcoin Transaction Fees, or Bitcoin Miner Fees, are a small amount of Bitcoin that's awarded to the Bitcoin Miner for processing a transaction. These are added to each transaction, with the sender covering the cost. So if you're sending $300, your total could be $300.65, depending on how fast you want to the money to arrive.
How Do Bitcoin Transaction Fees Work?
It all comes down to supply and demand. When renting an apartment, you're paying for the amount of space in the building per square foot, but with Bitcoin you're paying for the amount of space your transaction takes up on the Blockchain — the more inputs and outputs the transaction has, the more it will cost to be processed (more on that in a bit).
The other factor that determines the cost of the Transaction Fee is the Transaction Deadline. If you want to have your transaction rushed through, you're going to need to shell out more than you would if you were to wait. At the time of writing, it cost $0.65 to have it processed in less than 20 minutes and $0.04 in around 10,080 minutes.
Related: How To Mine Bitcoin
If you're using a run-of-the-mill digital wallet, the Transaction Deadline is set somewhere in the middle by default, so expect a moderate Transaction Fee. You do have the option to speed up the processing time, but this will of course result in a higher Transaction Fee. You can use a Transaction Fee Calculator to see an estimate of what this will be.
Best Bitcoin Transaction Fee Calculator
The best Bitcoin Transaction Fee Calculator we have used to date is Buy Bitcoin Worldwide's Bitcoin Transaction Fee Calculator. It's straightforward and fast, making it a must-have for the most novice and seasoned Bitcoin users alike. Just select a deadline, set the number of inputs and outputs, and it will churn out a calculation right away.
We ran some calculations for a standard one input, one output transaction and were presented with the following results:
- ~20 minutes: $0.34
- ~40 minutes: $0.24
- ~60 minutes: $0.24
- ~120 minutes: $0.02
- ~480 minutes: $0.02
- ~1,440 minutes: $0.02
- ~5,040 minutes: $0.02
- ~10,080 minutes: $0.02
What Is The Average Bitcoin Transaction Fee?
In November 2018, the average Bitcoin Transaction Fee was just $0.50 — down a massive $27.50 from December 2017, according to BitInfoCharts. It idled around the $0.25 to $0.75 mark throughout 2019, with the highest recorded daily average in 2020 being $0.82 on January 15, 2020. It's currently averaging $0.50 as of February 2020.
How To Decrease Bitcoin Transaction Fees
The most effective way of decreasing Bitcoin Transaction Fees is using a Bitcoin Wallet that supports SegWit — a modification that configures a transaction's data in a way that's smaller in size, and thus takes up less space on the Blockchain. From there, you can choose to group outgoing payments into one transaction to further cut costs.
How To Earn Bitcoin Transaction Fees
As we said earlier, Bitcoin Transaction Fees are awarded to Bitcoin Miners — and seeing as anyone can mine Bitcoin, you can take home a slice of them. To do this in the most efficient way possible, you're going to want to invest in a Bitcoin Miner. Specifically, we recommend a Plug-and-Play Bitcoin Miner like the Coinmine One.
There's a huge incentive to participate, too. As of October 2019, the cumulative amount of Bitcoin Transaction Fees that had been paid out (after being converted to USD) amounted to around $1 billion. Fast-forward to 2020 and the 204808.3479 BTC that represented $1 billion at the time is now equal to approximately $1.86 billion.