What Is Bitcoin Miner Fee?

When using the imKey BTC Wallet to transfer Bitcoin (BTC), you need to pay a fee, which is called the miner fee. The Bitcoin miner fee incentivizes miners to package transactions, ensures the smooth flow of tokens, and protects the Bitcoin network from abuse, maintaining its security.

How Is the Miner Fee Calculated?

Before diving into how miner fees are calculated, it's essential to understand three key concepts:

1. Transaction Size (in bytes)

Bitcoin transactions are essentially data structures. The fundamental unit of these structures is called an unspent transaction output, or UTXO (Unspent Transaction Output).

When making a transfer, UTXOs are used as inputs to form the transaction and create new UTXOs as outputs. This process allows Bitcoin to move between owners, continually consuming and creating UTXOs within blocks. The balance shown in your wallet is the sum of all UTXOs associated with your wallet address.

How does UTXO relate to transaction size? Generally, UTXOs significantly impact the transaction size.

For example:

• Transaction A consumes 3 UTXOs and creates 13 UTXOs, resulting in a transaction size of 803 bytes.
• Transaction B consumes 2 UTXOs and creates 4 UTXOs, with a transaction size of 379 bytes.

Assuming the same miner fee rate, Transaction A requires 2.1 times the miner fee compared to Transaction B.

2. Miner Fee Rate (sat/byte)

The satoshi (sat) is the smallest unit of Bitcoin, where 1 sat = 10−810^{-8} BTC. The miner fee rate refers to the amount of sats required per byte of transaction size.

The miner fee rate is influenced by the level of congestion in the Bitcoin network. During periods of high congestion, users can set higher fees to expedite transaction processing. For instance, on May 28, 2019, the miner fee rate surged to 200 sat/byte to ensure quick transaction inclusion.

3. Calculation Formula

The formula to calculate the Bitcoin miner fee is:

Bitcoin Miner Fee = Transaction Size (in bytes) × Miner Fee Rate (sat/byte)

Miner fees are paid in BTC.

Additional Notes

For miners, each mining reward is represented as a UTXO. When these mining rewards accumulate and need to be transferred, the transaction size can become excessively large (due to the high number of UTXOs), leading to high miner fees.

Understanding these concepts will help you make more cost-effective decisions when transferring Bitcoin.