“Understanding the fees”
Updated: Jan 27
Explaining Bitcoin fees isn't very simple, nothing in this encrypted world is. There is lots more to understanding how it works.
Some significant details I did not mention in my previous blog is that a bitcoin can be broken down just like any other known currency. For example, 1.00 USD can be broken down into different coins that make up the one-dollar bill. In the same way, this virtual coin can be divided, and you don't necessarily need to buy one entire Bitcoin. So, basically, you don't have to be rich to buy some; you can start buying small amounts.
You can instantly find out how many bitcoins you get for a certain amount of money, for example, using Tools Bitcoin.
Example: A fraction of 1 bitcoin.
One bitcoin that has not been broken down, when it's transferred, will be recorded in the blockchain; you just have to make one transfer. The tricky part when it comes to fees is that if you're making a transaction, and the coins you're sending have been broken down before, you will have to make a different transaction for each part that you're sending (that doesn't sound like fun.) This transfer will take longer to mine into the blockchain, therefore, a more expensive fee. This is because every part that you're sending has its own history of transactions, even though, in the end, it will all add up and the other person will receive one whole bitcoin (after everything's added up.)
It's true that this cryptocurrency might have solved many problems that users may have had with banks. Inventing a decentralized coin and having no third party involved in transactions sounds appealing for everyone who ever had an issue with bank procedures. However, if this coin wants to gain popularity in the future, I believe there must be a way to lower transaction fees because it's unreal when you are sending small amounts of coins.
These transaction fees are being paid to the miners. They are the ones who process transactions by verifying them and adding them to the public ledger, better known in this encrypted world as the blockchain. To have an idea of how fees have been increased through the years, here is the next chart
This chart shows the amount of bitcoin paid in total to all miners for the fees charged earned in a 24-hour period.
For example, according to the chart on May, 10th, 2011, miners received a total of 8 bitcoins. The price exchange at that time was 30.40 USD.
On December, 25th, 2017, miners were paid in total 1000 bitcoins; the price exchange being 13969420.00 USD at the time.
Hope you enjoyed reading! Feel free to comment.