Bitcoin Network Fees Explained
Bitcoin network fees, or bitcoin mining fees, refer to a sum that is charged to complete a bitcoin transaction. These bitcoin fees are tacked onto the amount that the sender inputs and added to the total transaction amount.
Like the bitcoin network itself, bitcoin fees are dynamic. When the bitcoin network gets busy, or when there are more transactions happening, the bitcoin network fees increase. Generally, when the network is quieter, the fees decrease.
One thing to note is that rather than using a manual system to determine bitcoin fees, Coinme uses a set-price bitcoin network fee structure. We set network fee pricing up front, so that Coinme users are aware of the fees included and so that they can send from their wallet with ease.
This means that sometimes the built-in Coinme network price might be slightly higher than the bitcoin network fee. Other times, it will be lower. We periodically adjust pricing to match network demand and bitcoin fee movement. Coinme never marks up network fees to make a profit. We make best efforts to match the actual network fee to allow your transaction to complete. In the end, having a set fee helps keep things simple and efficient.
What are bitcoin network fees?
Every bitcoin transaction is subject to network fees. The fee is actually built into the code that governs the entire bitcoin system.
Bitcoin network fees have been around since the very beginning. In the early days, the required bitcoin fee was 0.01 btc for every transaction. Over time, as the value of bitcoin has increased and because of community debate and code updates, the bitcoin network fee has changed. Today, rather than a set percentage of the overall transaction, the fee charge is more fluid.
The bitcoin fee situation has long been a topic of debate. Sometimes, the debate results in code upgrades. In 2017, for example, and after a long back-and-forth, the bitcoin protocol was updated to include Segregated Witness, or SegWit for short. The idea behind SegWit was to remove some of the information that is recorded in each bitcoin transaction, which would make the transaction smaller in terms of bytes. If a transaction is smaller, byte-wise, it is subject to fewer fees.
After all, the fees exist because each block recorded on the blockchain has a finite amount of storage capacity. When there is a lot of network traffic, users can signal that they are willing to pay more fees to miners in order for their transaction to be included in the next block. Sometimes this is important if a user needs a transaction confirmed quickly.
Overtime, as bitcoin continues to grow in terms of the size of the network and overall utility, it is likely that the bitcoin network fee debate will continue. One thing to remember, is that while fees are never fun, the bitcoin’s fee design helps keep the network secure and running smoothly.
Five reasons why bitcoin network fees are important
- Bitcoin network fees, also known as bitcoin mining fees, are a way to incentive the maintenance, growth, and overall security of the bitcoin blockchain.
- Bitcoin network fees prevent spam, network overload, and general network abuse.
- Bitcoin network fees help miners prioritize bitcoin transactions and confirmation times.
- Bitcoin network fees are a cost associated with distributed, decentralized networking. Bitcoin is not in the control of any one company or government. In order to stay independent, the network needs a way to support itself.
- Bitcoin network fees will pay to secure and grow the network long after the last bitcoin is mined in 2140. Having a built-in fee structure from the very beginning helps ensure survival well into the future.
Coinme's simple approach to network fees
Coinme is a bitcoin service provider. We allow Coinme users to quickly and simply convert cash into bitcoin at thousands of physical locations. Coinme also provides users with an easy-to-use bitcoin wallet which allows you to send and receive bitcoin to and from other people, as well as securely store your bitcoin.
As outlined earlier, there is no way around bitcoin network fees. Every person or every bitcoin service provider, like Coinme, has to pay network fees in order to ensure the health and security of the bitcoin network.
In the case of Coinme, we just choose to go about handling the bitcoin network fee a little differently. In order to maintain a simple and delightful wallet experience, we decided to charge all Coinme transactions a flat bitcoin network fee. Sometimes this fee might be more than the minute-by-minute network fee. Other times, it will be lower. We make adjustments to the Coinme bitcoin network fee periodically, so that our users can send from their wallet with ease.