Bitcoin rally has prompted a lot of attention, and it’s also one of the reasons why there is an increasing number of users registered on the blockchain network. The competition also had an impact on the transaction fees of BTC. The transaction fees are an important component of the Bitcoin ecosystem, and they should be taken into consideration when investors are looking to buy or sell BTC. In this article, we provide an overview of the transaction fees of Bitcoin and how they can affect your trading.
Before we talk about the transaction fees of BTC, we need to explain how to blockchain network operates. The blockchain network essentially works based on the contribution of individual miners that have computer systems specifically designed for mining. As we know Bitcoin mining, is a time-consuming as well as energy-consuming process, and based on that, the miners get a block reward as compensation.
In addition, the miners also receive transaction fees, which make an important part of the overall compensation because not everyone gets to claim the block reward. Only the miners who successfully solve complex computational puzzles and are the first to do so are being rewarded.
With that being said, due to the popularity of Bitcoin and the increasing difficulty of mining, the competition of this process was significantly increasing over the years. Consequently, today we can say that almost no one works as a solo miner.
Actually, most miners work in mining farms and pools. These are important factors that we need to consider because based on the traffic on the network, the transaction fees may rise or decline. More specifically, a block of transactions is filled with 1 MB worth of BTC transactions, and the miner chooses from the memory pool the BTC transaction with higher fees first, especially during network congestion as there is a higher number of BTC transactions waiting to be validated.
Online Trading and Transaction Fees
If you’re looking to trade online consistently or even daily, this is something that you should factor in when you’re making your decision. Luckily there are many reputable trading platforms like thebitcoinsystem.io that don’t charge annual fees for trading here. This is a great advantage, especially because you don’t want to pay any additional fees for your BTC investments on top of the transaction fees.
Moreover, the automated trading system is based on blockchain and AI technology and is able to offer trading at a higher win rate for its members. In fact, you can earn an ROI of up to 60% based on your initial investment of a minimum deposit of $250.
Other Factors That Impact the Fees
As we mentioned earlier, the priority of BTC transactions impacts the cost of BTC transactions. If you’re paying a higher fee for your BTC transaction, the miner is at an advantage because it offsets the costs related to mining. But, still, all things considered, the transaction fees are low; on average, they are $0.66 per block.
Another factor in the impact of the transaction fees is the fact that there is a limited pool of BTC. Nakamoto restricted the number of BTC to control the inflation rate and make sure Bitcoin achieves long-term success. This was a very good idea; however, the block reward exists when there are more Bitcoins to be mined, and today there are approximately 3 million left because the miners mined about 80% of the entire supply.
So, with that being said, when there isn’t any new BTC to be released in the network, the transaction fees will go higher, especially because they will become the primary compensation for the mining costs.
And the mining process still needs to exist because someone needs to verify the blocks of transactions to prevent the double-spending issue from occurring and provide an additional security level to the network.
Overall, the transaction fees are remaining low, but if you keep up with the latest news regarding the traffic on the blockchain network, you have better chances of recognizing the highs and lows in this field.
Cryptocurrency Exchange fees
Firstly, you pay the price of cryptocurrencies and then there is an exchange fee for every other one. You have to pay the fees if you want to trade in cryptocurrency or need to buy or sell them.
Every transaction that you do is added to the blockchain otherwise, it is incomplete. And this validation of blockchain is done through miners. Miners have to spend huge energy and computing power to do the job. That is why mining is expensive.
All the cost is divided and added to every transaction accordingly. Therefore, the transaction fee is valid and necessary for properly carrying out various different operations. However, miners can increase the mining fee and you will have to pay that. But this fee also depends upon the transaction size and the time when you are doing it.
Factors that determine the fees
Although miners determine how much they want to charge it is not completely up to them. There are several factors that determine the transaction fee that you have to pay.
1. Network conditions
The most important aspect is the condition of the network. Every block in the blockchain contains some information of 1 MB size. Therefore, the number of transactions is limited. However, there are times when the trading rates increases.
For example, someone popular like Elon Musk tweeted something positive about cryptocurrency. Now more people and especially the general public would like to invest in it. Everyone knows the popularity and the huge interest that they can get. So news like this will immediately increase trading patterns.
As a result of this, there will be more transactions at a time. This will reduce the space in every block. Thus, the list of awaiting transactions will increase and it will require more work from miners. Thus, they will charge more at such times.
2. Size of your transactions
As we know the maximum storage space of every block is 1 MB, the size of your transactions will affect it. If the size is smaller, it will be easier to deal with it and thus, less energy and power. However, a larger one will require more effort and will take more time. Therefore, miners prefer smaller ones.
You do not have to worry about this. The size calculation is done automatically by your wallet. Therefore, all you have to do is to manage your time of trading and how much you want to trade.
3. Wallet charges
Every wallet has the feature to calculate the overall charges of transactions. So once you plan to make a transaction, it will analyze the size of your transaction and the condition and space of networks. Afterward, it will tell you the fees.
This is divided into two categories. One is the regular and the other one is the priority fees. If you choose to prioritize your transactions, you will have to pay more and do the trade-in an hour. However, the regular one will charge you normal charges but you have to wait patiently for your turn.