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What are Blockchain Transaction Fees?

Reasons for being charged a transaction fee

Transaction fees have been an essential part of most blockchain systems since their inception. You, too, have probably paid fees when sending, depositing or withdrawing crypto.


There are two important reasons why the vast majority of cryptocurrencies charge transaction fees. First, transaction fees reduce the amount of spam on the network. It also makes it costly and difficult to conduct large-scale spam attacks. Second, transaction fees are an incentive for users who help verify and confirm transactions. You can think of transaction fees as a reward for helping the network.


Transaction fees on most blockchains are quite low, but depending on network traffic, you may have to pay a very high fee. The amount of transaction fee you are willing to pay as a user determines the priority of your transaction in being included in the next block. The higher the fee you pay, the faster the approval process.



Blockchain transaction fees

Bitcoin, the world's first blockchain network, set the standard used by many cryptocurrencies for transaction fees today. Satoshi Nakamoto realized that transaction fees would protect the network from massive spam attacks and encourage good behavior.


Bitcoin miners receive transaction fees as part of the process of creating a new block by confirming transactions. The pool containing the unconfirmed processes is called the memory pool (mempool). Naturally, miners prioritize transactions from users who agree to pay a higher fee when sending their BTC to another bitcoin wallet.

Therefore, malicious people who want to slow down the network also have to pay a fee for each transaction. Miners will likely ignore these transactions if they set their fee too low. But if they keep the transaction fees at the appropriate level, the cost will be very high this time too. Therefore, transaction fees act as a simple but effective spam filter.