Is there really a Bitcoin Transaction Fee?
Due to its rapid increase in value, Bitcoin has attracted a lot of interest in recent months and has many potential investors interested in buying. The journey to buying Bitcoins, however, can be a time consuming and expensive one.
If you want to profit and acquire Bitcoin as a promising investment opportunity, you should first inform yourself in advance of any and all terms—the costs of purchasing Bitcoins is not limited to the amount purchased but also for the transaction itself.
Each purchase is subject to a Bitcoin transaction fee and since it has also risen rapidly in recent months, a detailed look at these fees is worthwhile. Only those who understand how the fees work can ultimately benefit from them.
What is a Bitcoin transaction fee?
Basically, they are fees for Bitcoin transfers between two addresses. Fees aren’t mandatory for a transaction but rather voluntary.
Nevertheless, the Bitcoin transaction fee is an incentive for miners to create new blocks. Without the transaction fee, only the block fee would be charged on a transaction.
How is a Bitcoin transaction fee incurred?
The demand for Bitcoin also determines the fees. Because Bitcoin transactions accumulate in 1-megabyte blocks, there is space for 2,500 transactions. Every ten minutes, a new block is generated for new transactions. Thus, the network is capable of processing four transactions in just one second.
It’s not surprising that Bitcoin transactions can be quite time-intensive. For this reason, buyers depend on their transactions fees. This is to make the transmission of the transactions faster to the Bitcoin network and these higher fees, therefore, count towards a preferred transaction.
Many buyers who need a quick transaction pay a higher fee than buyers without time pressure. Following a transaction, the Bitcoin network confirms this.
Development of fees
As the Bitcoin currency itself has experienced a rapid increase in recent weeks and months, so too have transactions fees—for almost every transaction, buyers pay a fee. Although this is not a mandatory requirement, it is recommended, especially with a large amount of data.
Currently, the fee for a transaction is $16.25 (as of 12/2017). At the end of November of the same year, just four weeks earlier, the fee was $4.53. Understandably, this increase in fees has become problematic for many buyers.
Because a transaction should be made in a short time, an increased fee is almost always to be expected. If you do not pay, you sometimes have to wait for days to confirm the transaction.
The confirmation, in turn, means that the network has no doubt that the Bitcoins have arrived at the rightful recipient.
Until some time ago, the Bitcoin Cash System had proven itself as a way to speed up the time of transactions.
However, Bitcoin is still on an old system and high demand is exacerbating the situation. The so-called Lightning payment system could make transactions outside the Bitcoin network possible, however.
This would make the transactions independent of the Bitcoin blocks and could be much faster.
Who receives the Bitcoin transaction fee?
The Bitcoin miners are the first to confirm the transactions, so they also get the fees. The fee compensates the miner for his effort, which includes electricity costs and hardware.
The Miner receives the Bitcoin transaction fee only when a new block is created. There you will find all the collected transactions and the fees for all transactions go to the miner.
Anyone who chooses not to pay a Bitcoin transaction fee must prepare for a much longer transaction time, as the miner is not obliged to record transactions without charge in the block.
Alexander Weipprecht is the managing partner of Provimedia GmbH. As a trained IT specialist for application development, he has been advising leading companies on the following topics for more than 10 years: online marketing, SEO and software. Cryptocurrency is becoming increasingly important to businesses and investors. Through Coin Report and Krypto Magazin Germany, Alexander wants to give all people easy access to the subject matter.