Transaction fees

Hi,

I read the bitcoin whitepaper, and supplemental medium article. I was wondering if someone could clarify how transaction fees are computed. In particular, what causes spikes in transaction fees, like when transaction fees peaked at ~$54 on 12/23/2017:

59%20AM

I would appreciate any insight anyone can share on this. Thanks,

Jake

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This might help…basically a spike in transactions causes an increase in fees paid to miners to include a given transaction in the next mined block. The higher the fee paid, the higher priority and faster clearning for it.

Eventually once all block rewards are given out to miners, they will validate for fees only.

How Is Transaction Fee Calculated?

An array of parameters are considered for determining the value of transaction fees, which we’ll list out here:

  • Dust Spam: If the value of any transaction amounts to less than 0.01 BTC, then a fee of 0.0001 BTC is required. Therefore, the algorithm for coin selecting tries to avoid using an amount less than 0.01 XBT whenever possible.

(source: bitcoinfees.com)

  • Prioritise old & high- value co ins: If the coins used in a transaction are new, or amount to a small value, they are given low priority. The priority is assigned on the basis of age, size, and number of inputs.
  • The difference in Input & Output Amount: The transaction fee could be the difference in the input amount (sending funds) and the output amount (receiving funds) of the transaction. For example, if the input equals 0.12605724 and the output equals 0.12583356. The fee, 0.00022368, is actually the difference between these two numbers.
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