Bitcoin Fees Guide: BTC Transaction Fees Explained

Crazy enough:

Bitcoin fees are one of the most misunderstood aspects about Bitcoin.

The Bitcoin block size debate was all based around Bitcoin transaction fees.

How do Bitcoin fees work? And what’s the truth behind Bitcoin transaction costs?

Let’s jump in below.

Key Takeaways

  • Bitcoin fees are paid by Bitcoin senders for sending transactions on the Bitcoin network.
  • Bitcoin fees are calculated based on transaction size, not amount.
  • Bitcoin fees are fairly low compared to other payment systems.

What are Bitcoin Fees?

Bitcoin fees are paid by Bitcoin senders for sending transactions on the Bitcoin network.

Miners secure the Bitcoin network. Bitcoin fees are received by miners as a reward for their investment to secure the network.

How are Bitcoin Fees Calculated

Bitcoin fees are calculated based on transaction size, not amount.

That means, if you send two transactions, one for 1 BTC and one for 100 BTC, they could still cost the same if they are the same size.

Our Bitcoin transaction fee calculator is the best way to calculate accurate Bitcoin transaction fees.

cash tuck
Our Bitcoin fee calculator estimating an $0.43 USD cost for a Bitcoin transaction

Who Gets Bitcoin Transaction Fees?

Bitcoin miners receive the fees paid by Bitcoin users.

For example:

Joe might pay a 0.00001 BTC to send 1 BTC.

The miner that mines Joe’s transaction will receive the 0.00001 BTC that was paid as a fee.

Bitcoin Fees are SO High!

Well, let’s take a step back!

First of all, according to our Bitcoin fee calculator:

Let’s compare these fees to other methods, based on a $100 transaction value:

Bitcoin $100 Urgent
Bitcoin $100 Non-Urgent
Visa $100
PayPal $100
Fee Percent of Total

You’re probably thinking, what about cash? Okay, so the online payment methods charge more but with cash there are no fees!

Well, remember:

The store owner you’re paying cash to has to secure the cash and often pay for one of these:

cash truck
An armored truck that secures cash. Source

Any cost incurred by a store owner will be passed on to the customer.

For example, did you know all credit card process charge 2.9% fees?

That means if you go buy something for $100, the owner will keep $97.10 USD and pay $2.90 USD to Visa, MasterCard, or whatever processor they use.

If people only used cash, things might be 2.9% cheaper!

Now that’s not say we don’t benefit from some of the protections and benefits credit cards buy. But we’re just explaining this to show that even today’s payment methods don’t have such low fees!

What About Fees Charged by Exchanges?

There is a difference between exchange fees and Bitcoin network fees.

Exchange fees are charged for trading Bitcoin, like converting USD or EUR into Bitcoin. Most exchanges charge 1-3%. This is a service fee charged by the exchange for offering you the service of giving you bitcoins for dollars or euro.

Bitcoin network fees are paid when you use the actual Bitcoin network.

If you buy from an exchange and send to you your own wallet, you will usually pay both.

For example:

You want to buy $100 of Bitcoin on Coinbase.

You might pay $1.5 USD to Coinbase for the trade, and then another $0.05 to the Bitcoin network when you withdrawal your coins from Coinbase into your own wallet.

How to Lower Transaction Fee Costs

Use a wallet that supports Segwit

Segwit lowers Bitcoin transaction fee costs by lowering the amount of data needed for a transaction.

Most wallets today use Segwit, so you should be fine. But be sure that your wallet is using Segwit.

Use a Wallet with Good Estimation

Most Bitcoin wallets will try to estimate a transaction fee that’s cost effective for you.

Use a good wallet, or simply use our calculator to double check that you’re not overpaying.

About the Author

jordan tuwiner
Jordan Tuwiner

Jordan Tuwiner is the founder of His work has been featured in The Guardian, International Business Times, Forbes, VentureBeat, CoinDesk and many other top Bitcoin media outlets.