Term

Transaction Fee

Payment included in cryptocurrency transactions to incentivize miners or validators to process and include the transaction in a block.

Type:
blockchain
technical
basics
Also known as:
Network Fee
Gas Fee
Miner Fee
1
concept

A transaction fee is a payment included in cryptocurrency transactions that incentivizes miners or validators to process and include the transaction in a block. This fee represents compensation for the computational resources required to validate transactions and the block space they occupy.

Example 1.1

"When sending Bitcoin, Sarah included a transaction fee of 0.0001 BTC to ensure miners would prioritize adding her transaction to the next block rather than leaving it waiting in the mempool."

2
determination

Transaction fees are determined by various factors, with mechanisms varying across different blockchains:

Network Congestion: Fees increase during periods of high transaction volume Transaction Size/Complexity: Larger or more complex transactions require more resources to process Transaction Priority: Higher fees generally result in faster confirmation times Market Dynamics: Users compete in a fee market for limited block space Protocol Rules: Some blockchains have minimum fees or special fee structures

Example 2.1

"During Bitcoin's peak congestion in December 2017, average transaction fees reached over $50 as users competed for limited block space, while during quieter periods in 2020, fees were often below $1."

3
blockchain-specific

Different blockchain networks have unique fee structures and terminology:

Bitcoin: Fees are based on transaction size in bytes and typically measured in satoshis per byte (sat/B) Ethereum: Uses "gas" to measure computational complexity, with fees calculated as gas used × gas price (in Gwei) Bitcoin Cash: Designed for consistently low fees through larger blocks, typically below $0.01 Solana: Uses a deterministic fee model with extremely low costs per transaction Binance Smart Chain: Uses a gas model similar to Ethereum but with lower base costs

Example 3.1

"On Ethereum, a simple token transfer might cost 21,000 gas, while complex smart contract interactions like swapping tokens on Uniswap could use over 200,000 gas, resulting in proportionally higher fees."

4
optimization

Users can optimize transaction fees through several strategies:

Timing: Conducting transactions during periods of low network congestion Fee Estimation Tools: Using calculators to determine appropriate fees Replace-By-Fee (RBF): On supporting networks, increasing fees if a transaction is stuck Batching: Combining multiple payments into a single transaction Layer 2 Solutions: Using sidechains or payment channels for lower-cost transactions Alternative Networks: Choosing blockchains with lower base fees for non-urgent transactions

Example 4.1

"By batching weekly payouts to 50 employees into a single Bitcoin transaction rather than sending 50 separate transactions, the company reduced their total fee costs by approximately 80%."

All terms and definitions may update as the Cryptionary improves.