Blockchain commission: what are the sizes, what depends on, other aspects

Before you start to understand the intricacies of this process, you need to get acquainted with the concept itself. Blockchain commission is a fee for transferring bitcoins by miners to a specified address. 

What is blockchain commission?

The blockchain is a blockchain run by miners. Each block consists of a certain number of confirmed transactions. In other words, in order for the process of transferring bitcoins to be completed successfully, it is necessary to fix this process in the blockchain. 

With the development of Bitcoin, hackers have appeared who want to disrupt the system. Most often, they attacked the network by performing several hundred thousand transfer operations instantly, which led to the network freezing. In order to avoid such attacks, commissions were invented. 

At first, they were 0.0001 BTC per 1000 bytes, and this quickly scared off hackers, since hundreds of transfers required significant costs.

Another advantage of transactions with commissions was that they had priority when included in the block. The prioritization principle ceased to function, it was replaced by the selection principle that belonged to the miners.

At first, commission-based transfers were not popular, so the possibility of free transfers remained relevant. The time for conducting free transactions was no more than 15-25 minutes, and those who wanted to save money calmly waited for their turn

This system worked quite well: none of the users complained, the miners received good money, and there were practically no hackers. 

Who invented blockchain?

At present, the name of the founder of this system is unknown, there are only isolated assumptions.

According to one version, the idea of creating a blockchain dates back to 1991. W. Scott Shtornett and Stuart Haber experimented with storing documents on a cryptographically secured blockchain in order to organize files. The idea did not receive further development and did not find any practical application for more than ten years. It was only in 2008 that a programmer working under the pseudonym Satoshi Nakamoto gave her a second chance by fixing technical problems that interfered with the normal functioning of the technology. He also created bitcoin - a payment system that is based on this technology.

Translation algorithm

Now lets take a closer look at the bitcoin transfer algorithm in order to understand where the commission comes from. When sent, the transaction is validated by each host computer where the copy resides. At the same time, a check is made to ensure that there is a sufficient amount of bitcoins that can be spent.

After confirming the correctness, the transaction goes to its "waiting room" - Mempool - and at the next stage it gets to the miner, is included in the block, but still remains unconfirmed. 

In order for a transaction to become valid, it must be included in a so-called "mined" block. Here, the speed of the operation directly depends on the miner, the choice of which is based on the amount of the proposed payment.

 Since each of the blocks contains, on average, 2.5 thousand transactions, and during a period of high activity, a huge queue is lined up for confirmation, the specialist, first of all, looks at the size of the commission as a priority. Its size also indicates how important and urgent the operation is, since it is for urgency that a lot of money is most often offered.  

What are miners and what is their purpose

Miners are special programs that allow you to conduct transactions. With the help of certain mathematical operations, they are able to choose the order, confirming the transaction, or leave transfers in the queue (wanting to get more money). That is why transfers for which the highest commission is offered are confirmed first.

The throughput function of miners resembles the neck of a bottle through which transactions enter. After sending the transfer to the network, the transaction enters the queue (mempool) and waits in the wings. After a time, which directly depends on the size of the proposed commission, the miners pass the transaction into the block and, at the same time, confirm it.

This operation is quite open. This means that it is possible to personally view all the transactions that a particular block contains, find out its size, and calculate how much miners received for carrying out operations. But for this, you should use specially designed services.

Features of charging the fee

The process of charging and writing off the commission is a fairly simple algorithm that has not changed to this day. Obviously, the fee is debited from the account in addition to the transfer. 

Let us explain with a simple example: the user plans to transfer 0.4 BTC and charges a commission of 0.0006 BTC, therefore, a total payment of 0.4006 BTC will be made.

The user can specify the amount of the commission independently at the stage of setting all possible transfer parameters. In the commission field, you need to indicate the amount that the sender is willing to pay (you can also put a zero value).

If the sender does not fully understand the amount of the fee, there is a so-called "recommended" commission . Its size suggests that this translation will be included in the next block.

Not only specially developed resources, but also wallets can provide recommendations on the size of commissions. For some of them, you can change the proposed fee, others do not. 

The amount of the fee, which will eventually need to be paid, directly depends on the size of the transfer, it is also influenced by the "weight" of the program code (measured in bytes).

The general algorithm for generating code for translation may seem complicated only at first glance, in fact everything is much simpler.

A little about security

In addition to the fact that the blockchain offers users a fairly fast transfer operations, the system guarantees complete confidentiality and security of securities reliably stored in blocks. The blockchain using Bitcoin as an example is immune to hacking attempts, since the blockchain does not consist of a series of related accounts, but of a record of previously made transfers. At the moment when the user sends a request to execute a transaction, the system (on which the corresponding software is running) immediately begins to study the history of previously confirmed transfers. This is necessary in order to establish whether a person owns a sufficient amount of Bitcoins.

At the same time, other elements begin to check the recipients work, after which the process of combining the translation with others takes place, and then a specially developed mathematical algorithm is launched on computers for verification.

It would seem that you can hack the blockchain in order to change the record and transfer money to another account, but this operation will require too much computing power.

Since Bitcoin users check the completed transaction by monitoring all previously carried out, hackers will have to solve the most complex mathematical puzzles associated with each individual block to achieve their goals, and in a situation where blocks appear one after another, it is almost impossible to do this. 

Who pays the commission

Today, the sender pays the entire blockchain commission . Initially, the commission was charged according to different rules, for example, if the transfer was small or had a "priority" - you could not pay for it. Now the fee must be paid in any case. Miners initially choose options where the commission and the size are in the best ratio, and thereby try to increase their own profit. They figure out how much satoshi (the smallest unit of account on the bitcoin network) the user is going to pay for each byte of the transaction. 

On the other hand, each sender can monitor the congestion of the network at a particular time. Special services also allow you to find out how much you need to pay to include a translation in the nearest block.

What else affects the size of the commission

In addition to the congestion of the network and the degree of importance of the transaction, other points also affect the size of the commission. The most significant are:

1. The difficulty level of the script. When conducting transactions, it is possible to use various functions, such as, for example, multiple signatures. Its use significantly increases the size of the transfer operation. If a simple transaction is about 400 bytes in size, then a complex one can exceed 1000 bytes.
2. Number of inputs. At its core, each bitcoin held by users is a kind of link (the so-called "entry") to transactions carried out earlier, which resulted in an increase in capital. For example, if a unit of cryptocurrency to be sent was received from several sources at once, then it contains all links to previous transfers. This means that all these "inputs" will be sent during transmission, which significantly increases the size of the transaction. 
3. Number of outputs. Outputs are so-called “addresses” to which your payment will be sent. Usually there are 1-2 outputs, but there may be more, depending on the number of "addresses" to which payment is made, as well as the amount transferred.

The popularity of operations with bitcoin is increasing, tens of thousands of users conduct transactions every day. The number of blocks capable of accepting and confirming transactions is often insufficient.

Transaction requests are sent to the network and can wait a long time for confirmation. As mentioned above, the order processing algorithm has not changed, and until today, miners choose to conduct, first of all, those transactions that are more expensive. 

At the same time, users interested in the urgency of confirming and carrying out the transfer are trying to attract the attention of the miner in order to move forward in turn and this can be done in the only correct way - by increasing the amount of the commission. The longer the queue, the greater the number of those who are in a hurry and are ready to pay more, sometimes the offered amount increases at lightning speed and reaches unjustified sizes. At some point, it begins to resemble a kind of auction. 

Those who decide not to overpay run the risk of spending a rather long time in the queue, transfers with a small commission may not go through processing at all, simply "hanging", and no one except the senders will know about their existence.

How to reduce commission costs?

Since the size of the commission is not displayed in the blockchain itself, and the user cannot find out the true cost of the transfer, it can be determined only by calculating the difference between the amount of bitcoins sent and those returned back as "change".

Sometimes such calculations are quite difficult, especially for those who rarely use such transfers, and in such cases, you should use a bitcoin wallet that calculates the feerate (average fee per byte) at a particular moment.  

But, nevertheless, there is a way to reduce the size of the commission without "freezing" operations and monetary losses. In order to be able to correctly and, most importantly, effectively use the provided opportunities, you need to study some of the subtleties of the functioning of crypto resources. Among them are the following:

1. Fluctuating commissions and false resource recommendations. The fact is that the amount of the transfer fee is directly influenced by the size of the queue for its execution, for example, at one time of the day the commission is much higher than at another. Resources dedicated to tracking these changes often convey the wrong information because they simply cannot keep up with these changes.
2. Intentional overstatement of collection. A certain amount is often attributed to the commission, which is then received directly by the owner of the wallet.
3. Limits set on mining pools. Since the owners and the miners themselves are interested in increasing their own earnings, they are trying in every possible way to prevent a drop in the size of commissions. For this, certain limits are set, and operations for which the commission is lower are simply not included in the blocks.

Therefore, we draw conclusions: you cannot trust the recommendations of either various wallets, or sites that monitor the level of commissions, or, moreover, the limits of mining pools. Having studied at least a little basic information, the user will be able to determine such a commission size that will make it possible to spend bitcoins quickly and without freezing.

To independently navigate the optimal bet sizes, you should go to the Memory Pool (Mempool), where a queue formed from pending transactions is presented. There you can calculate the minimum fee with which the transfers were confirmed, and set the commission for your transfer a little higher. With this approach, the likelihood that the transfer will be carried out soon is quite high.

Another opportunity to save money is a properly selected wallet. You should avoid resources that do not have the ability to change the size of the recommended fee.

Do not forget about the technical side: when conducting a transaction for a large number of addresses, you will have to pay a considerable commission. 

Dependence of the commission on transactions on the time factor

The time factor plays an important role in determining the commission level. Here are 2 examples of this influence:

1. Daily fluctuations in translation costs are specific to each country. Since, due to the time difference, it is rather difficult to catch the general trend, the method of such monitoring should be applied only for a single territory.
2. Sharp jumps in the number of transactions during the holidays, as well as before and after them (we pay attention to both domestic holidays and those popular abroad). At this time, the number of transfers increases significantly, and, therefore, the commission increases significantly. It is worth remembering this and, if possible, postponing the transaction for a while.

At the same time, there are situations when a sharp jump in the number of transfers and a growing queue for their implementation are unjustified. There is a risk that at this time the crypto resource is being attacked by network hackers. Users who need to make a transaction urgently, most likely, have nothing left but to increase the commission, those who are not in a hurry can carry out the operation later, in a less dangerous situation.

Another option for solving this situation is to choose a critical resource that supports the development of Segregated Witness: despite the criticism, the technology works well and protects it.

Why users choose blockchain wallet

According to statistics, most people who deal with cryptocurrency most often choose it.

Lets start by analyzing the Blockchain.info website itself. In addition to creating the wallets themselves, it is possible to check the progress of transfers and their status, obtain information about the network load and many other functions. 

Although the resource itself is not fully Russified, everything related to your transactions and their management is presented in your native language. The site was created in 2011 and now has several tens of millions of wallets of active users.

Despite such widespread use, the resource is not the only and not the most reliable of all for a number of reasons:

1. If the user wants his wallet to be absolutely reliable, about $ 100 must be paid for it. Working with such a wallet is a little harder, but absolutely safe.
2. Cold wallets, which store passwords called private keys, can also guarantee the preservation of your funds. Their use does not require a network connection, but such services are tied to one device.
3. Online wallets have the lowest degree of protection, since all passwords are stored on the servers of the service. The only thing that somehow protects them from theft is encryption. The advantage is the convenience and ease of use of such services, the user does not make any effort to register and get started. These wallets are available for use from any device and anywhere in the world. 

There are the following types of wallets:

• desktop (installed on a computer through a special program);
• mobile (they use a simplified translation verification system);
• online wallets;
• gadget wallets (these are separate devices that work both remotely and when synchronized with a computer);
• paper (functioning in the system offline, which allows you to first generate a key, and then print it);

To enhance the security of online wallets, you can install two-factor authorization (using the Google Authenticator application), as well as create passwords not only for entering the online wallet, but also for carrying out transactions with funds on the account, which significantly increases reliability and complicates access to them. In addition, in order to restore information in an unforeseen situation, you can create a backup copy immediately after registration.

Methods for withdrawing bitcoins with a minimum commission

Theoretically, the withdrawal of funds from the blockchain.info wallet does not imply a commission, since a zero value is entered in the corresponding input field. Here you can also select the default options - "Regular" and "Priority". In this case, a standard fee is set, which, as you know, directly affects the speed of the operation. When choosing the "CustomizeFree" option, it is possible to set the size of the commission yourself. 

According to user experience, transactions with the proposed commission of 100,000 satoshi were carried out almost instantly, at 10,000 - about a day, and transfers with a fee of 100 - were delayed for a period of two days.

Minimizing costs is the most important factor at all stages of the translation process. There are resources offering the withdrawal of cryptocurrency, but there are only three main ones: direct exchange, withdrawal through an exchange and withdrawal using exchangers.

Each user independently selects the most convenient option, focusing on the size of the transaction, the urgency and purpose of the transfer. Each of the above options has its own commission size, features of the procedure and limits, which will be discussed below. 

Direct bitcoin exchange

When using this method, there is no commission. The obvious advantages are high speed and ultimate simplicity. Funds are withdrawn through a currency speculator, whose role is to receive bitcoins to the wallet and then transfer them to the recipients account in a certain currency (sometimes immediately in cash at a personal meeting).  

In the case of a direct exchange, the value is set personally by the currency speculator. Saving on the difference in exchange rate is possible. The risk of fraud is minimal, but before turning to the services of a speculator, it is worth learning about his reputation by studying reviews, as well as analyzing possible exchange rate options.

Withdrawal through the exchange

This method is convenient both for users who earn on cryptocurrency courses and for bitcoin holders. To start working with the exchange, you must create an account and comply with all the conditions set by the resource. Such sites set the size of the commission, limits on deposit and withdrawal of funds independently. 

It is possible both a direct exchange for currency at the rate specified in the system with the further withdrawal of the payment system, as well as trading.

In general, this method allows the withdrawal of funds to the Qiwi, Vodafone, Megafon and others wallets. To ensure the successful completion of the operation, you should first make sure that you have the required enrollment channel.

Withdrawal operation via exchangers

This method is extremely easy to use, but not entirely reliable, so you should be extremely careful when choosing a site. It is advisable to use the resources, verified by users and time. 

The withdrawal process consists of the following steps:

1. The currency pair is indicated on the page of the selected exchanger.
2. The resource shows the wallet number to which the transfer will be made.
3. The exchanger carries out the operation and the funds go to the user to the specified payment system.

There are a number of conditions and restrictions that sites offer. To choose, you should explore all the interaction possibilities that various banks offer. It is easiest to work with Sberbank here: it offers the integration of buying bitcoins into the users personal account, which greatly simplifies the process of making a transaction. 

It is necessary to take into account possible hidden commissions, the identification of which, most often, is possible only at the end of the operation. 

Which option should you choose?

Each of the proposed options has advantages and disadvantages, rules and limitations. Exchangers offer simplicity and speed of withdrawal, but, more often than not, not very favorable rates of operation. When working with exchanges, you will have to pay a commission, spend more time on registration and conduct of a transaction, but at the same time receive a security guarantee.

Each user, based on personal preferences, can choose a method that is more convenient for themselves.

System performance forecasts in the future

A significant jump in the number of operations to transfer bitcoins occurred on the eve of the New Year holidays. At the same time, two more events took place that provoked a tangible increase in collection: a sharp jump in cryptocurrency and the introduction of bitcoin futures into circulation. 

It is safe to say that the size of the commission will continue to grow, as the number of users is constantly growing, and the competition is gaining momentum.

The current situation can hardly be called favorable, therefore specialists with experience in the field of cryptosphere management are coming up with new ways to improve the situation. 

One such development is Segregated Witness. The main task of SegWit (abbreviated) is to increase the bandwidth of the blockchain, i.e. the number of transactions that one block can carry out increases, which helps to significantly increase the speed of their processing.

This innovation has been criticized, but the technology is slowly but surely being introduced into various crypto resources. This trend gives rise to hope that, as a result, the quality and quantity of transfers will improve, and the fees will decrease.

Blockchain today and in a few years

Currently, hundreds of professionals are working on the study of the system, conferences are being held and aspects are being studied. Experts are working on the implementation of the system in various areas. Measures are being taken to make the blockchain work in the world of trade. The plans are quite ambitious, but research confirms that the amount of money saved from putting the development into operation will significantly exceed the costs of experimenting and the implementation process itself. 

Experts believe that in the not too distant future, drones and even self-driving cars will use this system to pay for seats and recharge. It is also predicted that the time for remittances will decrease, which, moreover, will become more reliable.  

But this is all in the future, but for now we are only talking about conducting transactions and working with bitcoin. In conclusion, I would like to remind you that the main advantage of the blockchain is the ability to independently choose the commission for the transfer, without blind trust in other people and unconfirmed resources that they can offer. It is difficult to overestimate the reliability and the possibility of independent solutions.