What are Bitcoin network fees?

Carole
Carole
  • Updated

Transaction fees, also called network fees, are a way of preventing spam transactions that could slow down the network. They incentivize miners to validate transactions, and help support network security by keeping miners profitable. 

Network fees are fees paid to blockchain miners to secure and confirm your transaction, and are not charged nor collected by Gamma, but rather prompted by the network itself to include your transaction in an anchor block.

How are Bitcoin network fees determined?

Network fees are determined by the amount of data being transferred and the level of network congestion. Each Bitcoin block can hold a maximum of 4 MB of data, meaning that the number of transactions that can be processed in a single block is limited. Transactions that involve larger amounts of data consume more block space and therefore typically incur fees based on a per-byte rate.

When sending a transaction using a Bitcoin wallet, you will usually have the option to select your fee rate. This is the case when you create an inscription on Gamma, and when you mint one.

The fee rate is expressed in sats/vByte, which represents the satoshis per unit of data your transaction will use on the blockchain.

If you require immediate confirmation of your transaction, the optimal fee rate may vary significantly. However, if time is not a concern, you can pick lower fee rates.

Bitcoin transaction speed

The transaction fees a user sets are a reflection of the speed they'd like their transaction to be validated in a block: the higher the fees, the faster your transaction will be validated. 

After a user initiates a Bitcoin transaction, it enters the mempool and is validated before being added to a block. Miners have the discretion to select which transactions they validate and include in a block. In cases where there is a backlog of pending transactions, miners have an incentive to prioritize transactions with higher fee rates.

Typically, miners aim for transactions with higher fee to byte ratios. As network congestion eases and the number of transactions decreases, the cost of transaction fees also decreases.

Please note once the transaction is broadcast to the network, fees cannot be increased.

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