Bitcoin transaction fees play a crucial role in the network, incentivizing miners to include transactions in blocks. The fee is calculated based on the amount of data in the transaction and the level of network activity.
As a non-custodial wallet, Xverse does not control or profit from transaction fees; these fees are paid directly to network miners who process and validate the transactions.
Here’s a closer look at how it works:
Transaction Size and Fee Metrics
The size of a Bitcoin transaction depends on the number of inputs and outputs. Larger transactions with more inputs require more data, resulting in higher fees.
The fee is commonly expressed in sat/vB (satoshis per Virtual Byte), which indicates how many satoshis (the smallest unit of Bitcoin) you’re willing to pay for each byte of transaction data.
Another less common metric, Sat/WU (Satoshis per Weight Unit), which is used in SegWit transactions, where the fee is calculated based on the weight units of the transaction, considering both SegWit and non-SegWit data. In this context, 1 sat/vB equals 0.25 sat/WU, meaning users must calculate and set fees according to the metric supported by their wallet.
Network Activity and Fee Variability
During periods of high network activity, the mempool becomes crowded, and miners prioritize transactions with higher fees. This competition drives up the fees, especially when many users are trying to confirm transactions simultaneously.
The current limitation of Bitcoin block size is 1MB, which typically allows approximately 2,000 to 3,000 transactions per block. If the number of pending transactions exceeds the available space in the blocks, transactions with higher fees will be prioritized. Transactions with lower fees might experience delays as they wait for a block with enough space.
Setting an Appropriate Fee
Wallets like Xverse often suggest a fee rate based on real-time network conditions, ensuring timely confirmations. However, users have the flexibility to customize their own fee rate depending on how quickly they want their transactions to be confirmed. Transactions with lower fees might result in longer confirmation times, affecting the overall speed and efficiency, especially during busy periods.