How does the commission work in the Bitcoin network and why is it needed

How does the commission work in the Bitcoin network and why is it needed

Today, no traditional payment and financial system can do without commissions, hidden or explicit. The reason is simple: fiat currencies cannot exist in a vacuum, and to complete any transaction you cannot do without the services of various third parties, be they banks, payment operators or other financial institutions that need funds to support their work.

At the same time, cryptocurrencies that appeared relatively recently operate according to completely different “rules”, and therefore often cause a lot of questions for users, including those related to commissions. Among the main ones are how they are formed, as well as why and to whom they need to be paid.

Where do commissions come from?

First, it’s worth figuring out where the commissions came from. It is important to understand that in traditional financial systems it is impossible to digitally transfer fiat currencies without the participation of third parties. Indeed, in essence, money does not move “physically” – roughly speaking, during a transaction, the variables in the database simply change, only symbolizing the currency.

Thus, the money is credited to the digital accounts of users or companies, and for the functioning of these accounts and the implementation of transactions various financial organizations are needed – because this is a service, and any transfer is a service provided to the client.

Of course, such structures cannot exist without a source of profit: these funds are needed to pay salaries to employees, maintain and develop infrastructure, and other needs. For example, bank commissions form the second-largest income item of credit organizations (in the first place – interest on loans granted). Basically, bank commissions are charged for the services actually provided: money transfers, cash withdrawals, banknote, and coin conversion, currency conversion and various documentary operations.

But with cryptocurrencies, things are somewhat different. One of the main and revolutionary advantages of bitcoin and other coins is a kind of autonomy and decentralization. There is no governing body or institution in the blockchains, while the entire network consists of tens of thousands of individual computers around the world that synchronize with each other and update data.

In addition, unlike digital analogs of fiat currency, cryptocurrency tokens are completely virtual: bitcoins, ether, and other coins, figuratively speaking, are unique files that contain a value, and not a conditional representation of the value of something else. That is why BTC is so difficult to mine (mine) – colossal computing power takes to generate such a complex cryptographic code that allows achieving the uniqueness of each coin.

Where from?

So where do the commissions come from if you don’t need to use the services of third-party companies to complete a transaction and you just need to know the recipient’s address? The fact is that despite the “democracy” and independence from traditional financial institutions, blockchain networks still cannot exist “on their own” – someone must support this infrastructure. And miners are in this role: contrary to the name, they are not only directly “mining” new coins and tokens, but also provide confirmation of transactions, without which the operation of the blockchain would have been impossible.

A lot of transactions today are serviced in such a way that you do not have to pay a commission, however, if there are a lot of inputs in the transfer (that is, it has a large data size), then a small “fee” is encountered quite often. Thus, when a new block is located in the network, all information about transactions and their commissions is included in it. As a result, users who find this block receive a reward both for it and for all transactions included in it.

It is also important to consider that transactions with zero commission have the lowest priority, and transactions even with a minimum commission (about 0.0001 BTC) are standard, so they are likely to be included in the block. In addition, over time, block rewards decrease, due to which, in the foreseeable future, transaction fees will become the main source of income for miners.

Thus, miners spend their own computing power on maintaining the network and, in this case, comes to the forefront, electricity, which, as you know, is never free. And the system of transaction fees exists in order to offset the potential costs of processing transactions and supporting the blockchain – after all, few people want to do something at a loss.

As for the Bitzlato service, there are two types of fees on it: for a transaction and for a transaction to withdraw funds.

Transaction fee

These funds are used to support and develop the Bitzlato service. An additional fee for directly executing a transaction is not withdrawn, since bitcoins, although they are transferred from one user’s account to another’s account, are not transferred to the network within the platform.

Please note that after receiving a 200 rating, the exchange becomes free.

Withdrawal transaction fee

Unlike single transactions, in which a user sends a transfer from his wallet to another and can choose the size and, accordingly, the speed, a fixed rate of 0,0002 BTC per transaction is used on the Bitzlato platform. This amount may vary depending on network conditions.

It is worth noting that in our service, as well as on many exchanges, several transfers are combined into one transaction, thereby reducing the cost for each user, and without losing time. Now we carry out transactions every 10 minutes – accordingly, this is the maximum waiting time for a transaction to enter the network.

Sending will be considered successful after receiving at least one confirmation from the network. At the same time, a separate commission in favor of Bitzlato is not withdrawn upon withdrawal – all payments go to miners, and the service allows users to save additional money.

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