Bitcoin transactions still overwhelm the best of us when it comes to making transactions or tracking profits.
Despite several improvements in user experience designs, users still feel dejected when faced with the complex functionalities and mind-boggling calculations.
For that reason, this article will discuss the various ways to make seamless fee calculations.
But first, let us discuss what the idea behind these transaction fees is.
Payment can be defined as transferring crypto coin from one wallet to another. One can do these transactions regardless of the receiver’s identity. Professional miners further support these transactions by investing their computation power to execute the digital operation.
What do the miners gain? They receive a reward for their contributions along with the fees of the transactions. The exact figures of the operations are dependent on the size of computations and how much the miner supports data blocks. The incentives are therefore helpful in motivating these miners to perform accordingly.
But how much do you have to shell out to complete these transactions? Unfortunately, Bitcoin which was launched as a system to enable fast and cheap transactions has witnessed its fee rise exponentially as of late. Worse, the prices are still rising. This happened because of the of unavailability of the space for low-fees transactions, as Bitcoin’s 1MB blocks are nearly full.
The free market forces determine the transaction fees for Bitcoin. Free market forces mean that people are unrestricted when determining transaction fees and conducting transactions. It can prove to be a two-edged sword, especially in the absence of sufficient space.
SPACE IN BITCOIN TRANSACTIONS
You must be wondering what the meaning or significance of space in Bitcoin transactions are. Bitcoin blocks have only 1MB of space. It implies that one can carry out only a certain number of transactions . The average size of a Bitcoin transaction is roughly 230-250 bytes. Therefore, a Bitcoin block can accommodate nearly 4000-4500 transactions.
A miner gets his incentives from the Bitcoin network in the form of block rewards as well as the transaction fee. The miner has a natural inclination towards maximizing his profits. There are two ways to optimize the profits –
Gaining more block rewards by finding more blocks.
By choosing those transactions that pay higher fees, and including those transactions in the 1MB block.
As simple as it may sound, finding blocks is a complex, and energy and cost-intensive process. Moreover, it can be a time-exhausting operation. Therefore, any miner in their right mind would focus first on the transactions that pay more handsomely. Due to the free market users deciding the fees of the operation, as well as using the limited 1MB space, it becomes quite expensive to find a place in the blocks.
Free market users who are unable to wait for an extended period of time for the confirmation of their transactions, consequently attach more fee per bytes to their operations; thereby elevating the average costs in the free market.
CHEAPER WAYS OF MINING
However, there are also exceptions. It is possible to send Bitcoin from one wallet to another with no fee involved regardless of the ownership of the purse. There is probably no way to confirm these transactions , but nothing in the protocol prohibits such an operation. You just have to determine if you want to build a multi-million dollar mining network so that you can include the transaction in your block. This is considering the possibility that none of the professional miners would waste their time and efforts on your operation. You can overlook such a scenario.
The other alternative is transferring the Bitcoin by sharing the private key from one wallet to another. However, there are doubts if such a move will pay off. This option is not advisable since knowing the private key of an address amounts to possession of coins at that address. Everyone should handle private keys with utmost caution. In the majority of cases, transferring coins from one wallet to another through a regular transaction is equally effective. However, such an operation will incur a fee which depends on the factors mentioned above.
For someone who is new to Bitcoin, calculating the transaction fees can be tricky. Using an online cost estimator for the calculation and leaving the business of satoshi per byte calculations to the experts or the wallet’s built-in estimator, is much more preferable.
The current status of Bitcoin fees is such that the platforms and exchanges need to complete more than 250000 operations. These transactions remain pending in the Mempool. The size of such transactions increases every day and amounts to 113.5 MB. The Bitcoin’s blockchain examines and validates over 300,000 transactions each day, which is the highest in Bitcoin’s history thusfar.
It is frustrating to realize that there is no easy way to determine the fees for a Bitcoin transaction. The way Bitcoin functions, the final cost of conducting a transaction depends on several factors, which includes the amount of data that is part of the business. The blockchain often acts as a highway; it can get congested at peak hours. Therefore, unless you are in a hurry, bide your time and wait until the number of unconfirmed transactions in the Mempool decreases. Additionally, this will reduce the average transaction cost as well.
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