Glossary / Transactions & fees
Transaction fee
Also known as Miner fee, Miners fee, Network fee.
- Definition
- A transaction fee is the difference between what a bitcoin transaction spends and what it pays out, collected by whichever miner includes it in a block.
No field anywhere in a transaction holds the fee. It is implicit: inputs worth 500,000 satoshis paying out 480,000 leave 20,000 for the miner, and the software will happily let you leave too much. What drives the amount is how many bytes your transaction occupies, not how much money it carries.
How it works
The fee is a subtraction that every node performs independently. Consensus requires only that the outputs of a transaction total no more than its inputs, and whatever gap remains belongs to the miner. That gap is claimed in the block's coinbase transaction, which is allowed to pay itself the block subsidy plus the fees of everything else in the block.
Because the fee is leftover value rather than a declared field, mistakes are unforgiving. A wallet that miscounts input values, or a user who edits a raw transaction by hand, can create a transaction that hands its entire balance to a miner, and the network will accept it without complaint. Miners have occasionally returned obviously accidental fees when a sender could prove ownership, but that is a courtesy from a stranger, not a right.
Fees also cannot be revoked once mined. Before confirmation there are exactly two levers: replace the transaction with a higher paying version, or attach a child transaction whose own fee drags the parent up the queue. After confirmation the money is gone as surely as the payment itself.
The long-run role of fees is structural. The subsidy fell to 3.125 BTC per block at the halving on April 20, 2024 and halves again roughly every four years, so fees are slowly becoming the whole of a miner's income rather than a top-up. The security of the chain eventually rests on people paying to use it.
Why this matters when you buy bitcoin
Two completely different fees appear on the way from your bank account to your own wallet, and confusing them costs real money. The platform fee is what the venue charges to sell you bitcoin: about 0.99 percent per purchase at Swan, around 1 percent at Relai, zero on recurring orders at River, and a spread built into the quoted price at brokers such as Bitpanda and Yellowcard. The transaction fee is what the network charges to move coins afterwards, and no exchange controls it.
The network fee is charged per transaction, not per dollar, which changes the right buying rhythm. Buying 50 dollars weekly and withdrawing each time means paying a network fee 52 times a year on tiny transfers; buying weekly and withdrawing once a quarter means paying it four times, for the same coins. This is why bitcoin-only brokers offer threshold-based automatic withdrawals rather than sending after every purchase.
Batching is the other half of the picture. Large exchanges combine hundreds of customer payouts into one transaction, so the marginal cost of your withdrawal is roughly the 31 virtual bytes of one extra output rather than a whole transaction. A flat withdrawal charge collected from each of those customers is therefore mostly revenue, which is worth remembering when a platform tells you the network is expensive today.
For very small amounts the honest answer is to avoid the fee entirely. Lightning payouts, supported by Strike and Kraken among others, settle off-chain for a satoshi or two, and moving 20 dollars on-chain during a busy week can cost more than the coffee it was meant to buy.
Reading a 250,000 satoshi spend
Suppose your wallet holds two coins of 300,000 satoshis each and you owe someone 250,000. The wallet spends both coins, pays the recipient, and sends the remainder back to a change address it controls.
Two native SegWit inputs and two outputs come to roughly 209 virtual bytes. At 13 sat/vB the cost is 2,717 satoshis, so the transaction has inputs totalling 600,000 satoshis and outputs totalling 597,283: one output of 250,000 to the payee and one of 347,283 back to you. Nowhere in that transaction does the number 2,717 appear. Every node computes it by subtraction, and the miner who mines the block sweeps it into the coinbase payment.
Change the plan slightly and the fee changes with it. Paying from a single 300,000 satoshi coin instead would need only one input, about 141 virtual bytes, and cost 1,833 satoshis at the same rate. The payment is identical from the recipient's point of view. You saved 884 satoshis by spending one coin instead of two.
Transaction fee vs fee rate
A transaction fee is a total in satoshis; a fee rate is a price per virtual byte. Miners choose what to mine using the rate, because block space is the scarce thing being auctioned, while your wallet debits you the total. A large consolidation paying 50,000 satoshis at 5 sat/vB is unattractive to a miner, and a tiny transaction paying 3,000 satoshis at 100 sat/vB is snapped up immediately. Quote the rate when you talk about congestion and the total when you talk about your own cost.
Transaction fee vs block subsidy
Fees and the block subsidy land in the same coinbase payment, but only one of them is created out of nothing. The subsidy is new bitcoin issued by consensus, currently 3.125 BTC per block and falling on a fixed schedule until issuance ends. Fees are existing bitcoin transferred from users to miners, with no effect on total supply. When people say block 840,000 was worth more than 40 BTC to whoever mined it, they are adding a fixed 3.125 BTC subsidy to a fee total that users bid up between themselves.