Bitcoin is well known for its fame within cryptocurrencies. Over the years(from 2009 to present), Bitcoin developed into the most expensive virtual thing you could have. Today, one single Bitcoin is worth about $7,240.
Because of the price that Bitcoin conquered in December 2019, it becomes harder and harder to earn it. All the Bitcoin faucets mean nothing if you didn’t invest in it 2 or 3 years ago. Either you want to convert a Bitcoin into fiat(money) or just pay another you have to understand how fee rates work.
As any other currency, taxes to return a Bitcoin into US Dollars may differ day by day.
#1 – What is a transaction fee?
Because Bitcoin is a cryptocurrency, you may feel like a transaction to US Dollar is much complex than a transaction between two currencies.
Bitcoin transaction fees are known as mining and allow users to set up their transaction. It is somehow like the first to come, the first to be served.
It’s also about getting into the blockchain and getting the acceptance as fast as possible(if not, the transaction fee may rise). As long as you pay enough fees for a transaction, there will be less time stuck in the blockchain. Nobody wants to see their transactions pending for a long time or even denied.
However, a block can stand a finite number of transactions. The possibility for yours to be denied because you didn’t pay enough fees and because someone came up with a greater amount of money are reasons for yours to be declined.
Keep in mind that a fee is a signal for the miner(the one who accepts your transactions) on how important your transaction is.
#2 – How can you calculate a Bitcoin transaction fee?
The mining process may seem a little bit complicated. However, this is the most important factor for a fee to get calculated and for a transaction to be calculated.
As on every type of market, transactions differ in size. It depends on how much profit you have made and how much you want to redeem.
The fee rate you have to pay consists of the smallest unit of account in Bitcoin per byte. After all, everything happens virtually. We need to keep up with modern technologies.
The rate also varies on how many users do a transaction at the same time.
You can always check trading websites to watch how fees increase and decrease.
#3 – How to get the transaction size?
Because it takes a little bit more time to get used to Bitcoin transactions, creators of this field come up with 3 factors that help.
- The number of how many things are in. Any Bitcoin that you own is like a reference to past transactions and how much you own in that time. Those references are called inputs. If you send Bitcoins to someone else, those are called outputs(you got the idea). The more inputs your transactions have, the bigger it will be.
- The number of outputs. The number of outputs differs from the number of inputs. Whenever you are sending Bitcoins to somewhere else, there are created two outputs. One is for the person you are sending Bitcoin to, and one for yourself as a paying back.
- Script complexity. Here is a complicated software that runs through a blockchain. It is not merely important if you don’t want to run a blockchain yourself.
#4 – How digital wallets work with those transaction fees?
Most of the wallets such as Coinbase offer a reasonable fair fee for each transaction you make. It allows you to adjust the fee you want to pay or set a fee preference. The last setup allows you to be up-to-date whenever the fee decreases and it’s good for your transaction.
Everyone who first started mining and investing in Bitcoin had a huge deal with the transaction fees. Over time, there are many tips and tricks to be learned and get the best deal of your transaction. However, keep in mind that after you convert Bitcoin to US Dollars, and then from US Dollars to another currency, there may be an amount of money that gets lost.