The answer to “why are the fees so high” is somewhat technical and requires some understanding about how the bitcoin network works.
Fees for your transaction are a function of two things:
- The overall network requirement for fees (how congested the network is)
- The number of inputs involved in your specific transaction (the size of the transaction)
Network Congestion on the Blockchain Competitively Raises Fees
The main reason for high bitcoin miner fees is supply and demand. The bitcoin block size is 1MB, which means that miners can only confirm 1MB worth of transactions for each block (one every ten minutes). If the number of transactions waiting to confirm exceeds what can fit in 1 block, bitcoin miners choose to confirm the transactions with the highest bitcoin miner fees.
The year 2017 was a good example of high miner fees. For all of 2017, the number of bitcoin transactions people wanted to make every 10 minutes exceeded what the 1MB block size could handle. As a result, miner fees skyrocketed.
Larger Transactions Cost More to Send
Generally, bitcoin transaction fees are directly proportional to the size in bytes of your transaction.
Sending a bitcoin transaction is a lot like sending mail through the postal service. If you're sending a small letter, it is quick and inexpensive. However, if you're trying to send a large package, shipment will take longer and be more expensive.
Similarly, bitcoin fees are sensitive to the size of the transaction. Multiple transaction inputs will make your transaction bigger. The number of inputs to a bitcoin transaction is, for example, analogous to a single one-hundred dollar bill versus $100 worth of pennies. For a $100 transaction using the one-hundred dollar bill there will be only one input (the one-hundred dollar bill). On the other hand, for a $100 transaction using all pennies there will be 10,000 inputs (one for each penny).
Bitcoin does not distinguish between the value of each input. Each input must be digitally signed for the transaction to be valid. Signing an input requires a certain number of bytes (file space). Signing one input results in a small transaction size. Signing 10,000 inputs results in a large transaction size.
If your wallet has a balance of $70 and only $20 can be sent, then your wallet balance is made up of, for example, pennies and dimes instead of ten and twenty dollar bills. You likely accumulated the $70 in many smaller transactions rather than in just a few larger transactions.
What if I have many small inputs in my BitPay Wallet?
You may not be able to spend a part of your wallet balance because the fees for sending some funds are higher than the funds themselves. If you are using the BitPay App, you may wish to view your spendable balance.
Here’s how to view your spendable balance in the BitPay Wallet:
- From the home screen, tap your wallet name.
- Tap Send at the bottom of the screen.
- Tap your wallet name under the Transfer to Bitcoin Wallet section
- Tap Send Max
- Tap GOT IT if a dialog box appears
- You will then be able to view your spendable balance, which will include the miner fees needed to pay for the transaction.