Bitcoin explained in 60 seconds - part #5

Every day I visit the mempool to see what the transaction fees are.
This then displays how much your transaction will cost approximately.

But do you know how this actually works?

Let me explain in no more than 60 seconds⏳

➡️ What are Bitcoin network fees?

The available area for transactions in a block is currently limited to 1 MB (1000 Bytes) in the Bitcoin network. This means that to get your transaction processed quickly, you must outbid other users.

Transaction fees are always displayed in Sats/vB.

This means Satoshi per byte.

Suppose your transaction contains 1500 bytes, the cost is calculated in the following way.

Here we assume an average priority Sats/vB 84.

Sats/vB: 84 * 1500 = 126.000 Satoshis (0.00126000 BTC)

➡️ What drives transaction costs?

This is actually just like in the "real" world. This is all about supply and demand.

The higher the demand to the Bitcoin network, the higher the cost will be.

So it can pay huge dividends to keep an eye on the mempool before going through with a transaction. Are costs currently high? Then wait a while and try again later