Welcome to the first article of our series on Bitcoin transaction fees. In five articles, we will explore Bitcoin transaction fees, their impact on mining profitability, and future projections. This introductory piece explains what transaction fees are and why they matter.

When you send bitcoin, you typically include a transaction fee to incentivize miners to prioritize your transaction in the next block they mine. These fees are variable and can change based on several factors, such as network congestion and the transaction size in bytes.

Miners add a new block to the blockchain approximately every ten minutes. To prevent the blockchain from becoming too large, each block has a theoretical maximum size of 4 MB, often expressed as 1 million vBytes or 4 million weight units. The vByte measurement is the most common.

When a user sends a Bitcoin transaction, it enters the mempool, a list of transactions waiting to be added to the blockchain. Miners select transactions from the mempool to include in the blocks they are solving. Due to the limited space in each block, profit-driven miners prioritize transactions with higher fees per vByte. Consequently, transaction fees are usually denominated in satoshis per vByte, or sat/vB.

Above, you can see an illustration of blocks from the premier block explorer, Mempool.space. On the right side, highlighted in purple, are blocks that have already been solved by miners and added to the blockchain. Using the most recent block mined by AntPool as an example, each block displays the following information:

1. ~ 3 sat/vB:
The average fee of all transactions included in the block.

2. 3 - 300 sat/vB:
The fee range of all transactions included in the block. There is a wide spread because some users are willing to pay high fees for faster confirmation, while others are willing to wait to minimize fees.

3. 0.042 BTC:
The total transaction fees in the block. The mining pool that solves the block receives these fees. The miner's goal is to maximize this number under the constraint of 1 million vBytes of block space.

4. 4,095 transactions:
The number of transactions included in the block. Each block typically has space for about 5,000 transactions, depending on the average transaction size in vBytes.

5. 16 minutes ago:
The time elapsed since the block was mined.

6. AntPool:
The miner that solved the block and added it to the blockchain. Mining pools, which control large amounts of computing power, are typically the ones solving blocks.
On the left side, highlighted in yellow, you see blocks that are waiting to be solved by miners and added to the blockchain. Although these blocks don't exist yet, the block explorer projects their expected state, providing projected values for all relevant metrics. Below these projections, the block explorer estimates the transaction fees required for inclusion in upcoming blocks. In our example, it is estimated that you must pay 5 sat/vB to ensure your transaction has high priority for miners.

Transaction fees are a vital component of the Bitcoin network, playing a key role in how miners decide which transactions to add to the blockchain. Bitcoin users are concerned about transaction fees because they bear the cost, while miners rely on these fees as part of their revenue.
​

Transaction fees serve several purposes in the Bitcoin network. Here are the most important.

Spam Prevention
I would argue that the primary purpose of transaction fees is to prevent spam and malicious activity on the network. By requiring users to pay a fee for each transaction, the network discourages the creation of numerous low-value transactions that could otherwise clog the system. This ensures the blockchain remains efficient and that legitimate transactions can be processed promptly.

Transaction Prioritization
Another key purpose of transaction fees is to help miners prioritize which transactions to add to the next block during periods of high network congestion. Miners prioritize those with the highest fee relative to the transaction size, measured as satoshis per vByte (sat/vB).

Security Assurance
Transaction fees incentivize miners to keep dedicating computing power to the network as the block subsidy declines. Miner revenue consists of both the block subsidy and transaction fees. Since the block subsidy halves every four years, miners will increasingly rely on transaction fees. Without transaction fees, miner revenue would eventually trend toward zero, causing mining activity to cease and leaving the network vulnerable to attacks.