Bitcoin Transaction Fees: A Full Guide and How To Save

When done right, Bitcoin can be a lucrative investment. Unfortunately, the initial capital required for a cryptocurrency investment is not all that an investor needs. Bitcoin transaction fees are associated with most Bitcoin activity and are unlikely to go away. When Bitcoin was first introduced, transaction fees were primarily charged to prevent spam transactions from flooding the network.

Now they act as a way to compensate miners for keeping transactions going as fast as possible. Read more below about how much Bitcoin transaction fees cost and how you can save.

What are Bitcoin transaction fees?

Almost every time bitcoin is involved in a transaction—making a payment with bitcoin, buying bitcoin, etc.—transaction fees are charged. Two of the main factors that determine bitcoin transaction fees are the data volume of the transaction and the speed with which the user wants to complete their transaction.

On August 23, 2022, the average bitcoin transaction fee is 0.000044 BTC or $0.957. Over the past year, it has fluctuated from less than $1 to almost $5. However, at its peak in April 2021, the average transaction fee reached over $60.

Here’s a look at different types of crypto fees to get a detailed idea of ​​how the fees are calculated.

mining fees

Bitcoin mining fees are based on data volume and transaction speed. Transactions are processed in chunks that can contain up to 4MB of data. The larger the transaction and the more people initiate transactions, the higher the mining fees.

The amount a person pays in fees also affects the speed at which their transaction is processed, and vice versa. Miners choose which transactions to process, often targeting transactions with higher fees first. The more a person pays, the faster their transaction is likely to be processed.

tip

Service fees are charged by third parties involved in processing the transaction. It can be a cryptocurrency exchange, a bitcoin ATM or another service provider.

Exchanges typically charge fees based on either a flat rate or a percentage of transaction volume. They offer different tiers, which usually makes high value or more frequent transactions cheaper compared to low or rare transactions.

How to save on bitcoin transaction fees

Crypto investors can use the following four tips to reduce bitcoin transaction fees.

1. Time transactions for lower fees

Because fees are likely to be higher when many people are transacting, investors should consider moving transactions to a different time of day. While cryptocurrency is used around the world, the majority of users are located in the United States.

Therefore, bitcoin spot volume is highest in the mornings based on US time zones. However, fewer transactions tend to be made on weekends. Traders can schedule non-urgent transactions during periods of lower volume, lowering their miner fees.

2. Compare the fees for different service providers

Each crypto exchange or other service provider has different fees for their services. Below are the rates of some popular crypto exchanges.

crypto exchange	fees
Binance.US	0.1% manufacturer fee; 0.1% taker fee
bit flyer	Up to 0.1% flat fee
BitYard	0.1% to 0.3% manufacturer fee; 0.1% to 0.3% buyer fee
coin base	1% flat fee
FTX.US	Up to 0.1% manufacturer fee; Up to 0.2% taker fee
Twins	Up to 0.2% manufacturer fee; Up to 0.4% taker fee
octopus	0.9% flat fee for stablecoins; 1.5% flat fee for other cryptocurrencies
KuCoin	Up to 0.1% manufacturer fee; Up to 0.1% taker fee

Comparing the fees of different service providers is an easy way for crypto investors to save on transaction fees. Some websites and apps allow users to compare multiple providers at once, making it quick and easy to choose a service provider with low fees.

3. Use Lightning network

When Bitcoin was first introduced, there were issues with processing times. However, the Lightning Network was introduced to speed up payments by using an off-chain payment protocol.

The Lightning Network can create off-chain payment channels that create separate ledgers and then merge with the blockchain when the channels are closed. Investors can reduce their turnaround times to milliseconds by leveraging the Lightning Network.

The fees are also lower than the fees associated with regular bitcoin transactions. The Lightning Network is especially useful for small payments with Bitcoin, since people don’t have to pay high micropayment fees.

4. Check fees for different cryptocurrencies

Bitcoin is known for having relatively low fees as its mining process has been simplified over time. However, some cryptocurrencies still have much lower transaction fees. For example, the average Bitcoin Cash transaction fee is less than a cent. Litecoin is another good alternative for low transaction fees.

On the other hand, Bitcoin’s current transaction fees are lower than Ethereum’s average of $2.41. As such, investors must balance their desire for low fees with the ability to use their cryptocurrency choice for a variety of transactions.

Bring away

Bitcoin transaction fees can get expensive if investors don’t strategically plan how they exchange crypto, make payments, or complete other cryptocurrency transactions. Bitcoin transaction fees often fluctuate, but investors can take specific steps to lower fees.

Ultimately, it will come down to completing transactions as often as possible during periods of low volume. In addition, investors should choose service providers who can offer them the lowest service fees.

When selecting service providers, crypto traders should consider factors such as the cryptocurrencies available, cyber security, policies affecting liquidity, and other details affecting how transactions are conducted.

Information is correct as of August 26, 2022.

Editor’s note: This content is not provided by any of the organizations discussed in this article. Any opinion, analysis, review, rating, or recommendation expressed in this article is solely that of the author and has not been reviewed, approved, or otherwise endorsed by any entity named in this article.