Transaction Fee
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Transaction fee is the amount paid by the sender to have a transaction included in a block. Fees go to miners (Proof-of-Work) or validators (Proof-of-Stake) and serve two critical roles: they compensate network operators and they protect the network from spam.
How fees work
Block space is limited. When more transactions want to be included than fit in a block, miners pick the ones paying the highest fee — this creates a fee market where senders effectively bid for priority. Higher fee → faster confirmation.
Bitcoin — sats/vByte
Bitcoin fees are expressed in satoshis per virtual byte (sats/vByte). Fee = transaction size × sats/vByte rate.
- A typical simple transaction is ~140 vBytes
- At 20 sats/vByte, the fee is 2,800 sats (~$3 at $100K BTC)
- During congestion, rates can spike to 100–500+ sats/vByte
Wallets show current fee recommendations (high / medium / low priority) based on mempool state.
Ethereum — gas
Ethereum fees are priced in gas — a unit measuring computational work. Every operation has a fixed gas cost (a simple transfer costs 21,000 gas; complex smart contracts can use millions).
Fee = gas used × gas price (in gwei). 1 gwei = 10⁻⁹ ETH.
EIP-1559 (Ethereum, 2021)
EIP-1559 replaced Ethereum's old first-price auction with a more predictable model:
- Base fee — algorithmically set per block based on demand; burned (removed from supply)
- Priority fee (tip) — goes to the validator as an optional incentive for faster inclusion
- Max fee — the user's ceiling; unused portion is refunded
Base fee rises when blocks are >50% full and falls when <50% full, smoothing the fee curve.
Why fees spike
- Congestion — popular NFT mints, token launches, or market volatility flood the mempool
- Network outages elsewhere — if one chain is down, activity concentrates on another
- Complex transactions — DeFi operations can touch many contracts, using more gas
