Transaction fees

Miner fees are a fee that spenders may include in any Bitcoin Transactions. The fees may be collected by the miner who includes the transaction in a Block. Transaction fees are fees for the service of writing transactions onto the Bitcoin ledger. The service provided by miners is transaction validation and storage and the security of the Bitcoin network and ledger.

Overview

Every Bitcoin transaction spends zero or more bitcoins to zero or more recipients. The difference between the amount being spent and the amount being received is the transaction fee (which must be zero or more).

Bitcoin's design makes it easy and efficient for the sending party to specify how much fee to pay however it is theoretically possible for a merchant to pay the mining fees on behalf of their customers as an incentive to use their service. Services that make this possible have been proposed.

When a miner creates a block template, they are entitled to specify where the fees paid by the transactions in that block proposal should be sent. If the proposal results in a valid block that becomes a part of the Block chain, the fee income will be sent to the specified recipient. Miners are forced to wait 100 blocks before they can move coins received in a Coinbase transaction.

Loss of fees

If a valid block awards its finder less than the available fees plus the Block subsidy, the Satoshis which are not collected are permanently destroyed. This has happened on more than 1,000 occasions in Bitcoin's history reducing the token supply by over 50 Bitcoins.

The Bitcoin Fee Market

A default minimum fee is usually needed for a transaction to be propagated across the network and mined into a block however a market has arisen offering discounted transactions for bulk generators. The upcoming MinerAPI package will give miners a means by which to interface with regular users and to offer their own unique pricing on a per-node basis. User wallets will be able to make use of this service to present users with fee rates that present estimated 'time to confirmation' giving them flexibility to choose lower fees for larger or less important transactions, without having to worry about those transactions failing to propagate.