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With Bitcoin hitting an all-time-high every week, the demand for the currency is bigger than ever. Unfortunately, this high demand comes with a downside as well.
You probably have noticed it by now, but the current Bitcoin mining fees are getting significantly higher, potentially scaring off newcomers. In today’s article we are going to take a closer look at what a miner’s fee is and why Bitcoin’s fee are currently so high.
Also referred to as transaction fee, network fee or simply Bitcoin fee, the mining fee ensures that your transaction is processed correctly into the blockchain.
Because Bitcoin is decentralized, every transaction needs to be verified and processed in a so-called block (a group of transactions).
These transaction blocks need to be ‘mined’ by miners (the people that verify the transactions), ensuring the following two things:
The miners get rewarded in Bitcoin (essentially generating new coins); Transactions are added to the block, securing and verifying them.
However, this mining procedure comes at a cost, as these miners have to pay for equipment and electricity. That is where the mining fee comes into play. By adding a (higher) mining fee to the transaction, you incentivize the miner to include your transaction to the block.
Okay, but why is this mining fee so high at the moment? Well unfortunately, the fee is very high due to popular demand.
With the market cap increasing, the amount of transactions that are queuing up are increasing as well.
On top of that, the amount of transactions that fit in one block (which is only 1MB) are limited.
Because the blocks are relatively small, and a lot of transactions are waiting to be included, a bidding war takes place. People want to be sure that their transaction is included, so they increase the mining fee, resulting in the high mining fees of today.
Lately, the Bitcoin blockchain has gotten so congested that on the 18th op April over 136k transactions were waiting for confirmation.
As a result, the mining fees have been fluctuating between 10 euro and 52 euro in the last two months.
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