The transaction fee of Bitcoin is a very clever design, but also a rather confusing knowledge point. For example, if you look at a transaction, you will see that the handling fee does not correspond to a specific output. Who decides the amount of the handling fee, what are the steps for collecting handling fees, and will the increase in handling fees affect the use of Bitcoin for daily micropayments? This article will reveal them one by one.
Fees are formed in the free market
Bitcoin is a decentralized system, and the specific amount of handling fees is not regulated by a central authority, but is formed by free competition in the market.
Fees are the result of a game of supply and demand. The more users who use Bitcoin to transfer money, the busier the miners will be. If the transaction fee is set too low, the transaction will be ignored by the miners. Of course, at the same time, the transaction fee set by the user can also be different. Those who are anxious to transfer money can set the transaction fee higher, so that the miners will give priority to processing. And the lower the fee setting, the transfer will not necessarily fail, because the miners will consider these transactions when they are not busy. https://bitcoinfees.earn.com/; you can see the rough correspondence between different fees and transfer speeds.
The handling fee is the embodiment of the right to freedom. Bitcoin is an open network, and every transaction is a self-expression of the user. For example, I send a transaction, and some people think it is a spam transaction, so who will arbitrate? If there is a central authority to arbitrate, then the beast of power will be born. Through handling fees, freedom can be achieved and resource abuse can be prevented.
To put it simply, the fee is determined by the market.
Why is the handling fee not output?
Going a little deeper into the technical details, go to http://blockchain.com to view a transaction, and you will find that there is no transaction fee in the output of the transaction. So how does the fee finally reach the miners?
The transaction fee is the input minus the output of the transaction. Although the user can see the transaction fee when constructing a transaction with a wallet or viewing the details of a transaction in the block browser, the underlying transaction data itself does not include the transaction fee. The way to set the fee is to ensure that the sum of the input of the transaction is greater than the sum of the output.
There is a reason why there is no fee in the transaction. To put it simply, when the transaction is constructed, the transaction fee does not know whose Bitcoin address the transaction will eventually be transferred to, so it is impossible to directly display an output about the transaction fee in the transaction. Transactions are first constructed by users and then broadcast to the web. Then miners compete to produce blocks. After the block is generated, it is known to whom the fee will be transferred. The way to charge the handling fee is like this. The miners who produce the block will construct the coinbase transaction in their own block, in which the miner will accumulate the handling fee of all transactions in this block, and then point the money as output to their own address. Note that in addition to the handling fee, the output of the coinbase transaction also includes the block reward, which constitute the incentive of Bitcoin.
That’s why the transaction itself doesn’t include a fee, interesting, right?
Handling Fees and Micropayments
As an electronic cash system, one of Bitcoin’s visions is to enable everyday micropayments. But if the fees become higher and you need to pay $10 for a cup of coffee, will this vision still be realized?
Let’s first talk about why the fees have gradually increased in the past two years. More people use Bitcoin to transfer money, but Bitcoin still produces a block in ten minutes, and the block capacity is limited, so the handling fee is also rising. In addition, as the price of coins rises, many people participate in mining, resulting in an increase in mining costs. With the rising cost of mining and the gradual reduction of block rewards, it is undeniable that the fee will continue to rise.
However, with the second-tier solution, ultra-low handling fees can still be achieved. Through the second-layer scheme such as the Lightning Network, the countless small transactions generated by users are compressed into one transaction and then handed over to the Bitcoin network as the first layer for execution, so that users can enjoy ultra-low handling fees, and at the same time There is also no need to wait for network confirmation time.
In short, the handling fee will indeed increase, but through the second-layer solution, Bitcoin can still serve the micropayment scenario.
Summarize
Regarding transaction fees, let’s talk about it here to summarize. First of all, the handling fee is not set by an authority, but is formed in the market game. In addition, the handling fee is specified by the user when constructing the transaction, but the underlying data of the transaction does not include the handling fee. The input minus the output is the handling fee, and the handling fee is transferred to the miner in the coinbase transaction constructed by the miner. of. Finally, due to the existence of the second layer solution, the increase of the fee will not hinder Bitcoin to serve the micropayment scenario.