Bitcoin transaction fees play a crucial role in rewarding miners, but they’re far from stable. Over the years, fee dynamics have shifted dramatically—shaped by technological developments, user behaviour, and broader market cycles. From the high-fee frenzy driven by Ordinals and BRC-20 mints to the historically low fee environment of early 2025. Let’s dive into transaction fees, how they work, what drives their volatility, and what the future might hold. For premium members we included strategies to hedge against unpredictable revenue from fees.
What Are Bitcoin Fees?
A Dynamic Fee Market
The Golden Fee Days
Historic Lows Early 2025
Rock-Bottom Fees Regardless of Priority
Mempool Clearance
Premium Members Only:
Future Perspective on Transaction Fees
Mitigating Fee Instability in Mining
What Are Bitcoin Fees?
Unlike traditional fiat currencies, which are managed by central banks and processed by financial institutions, Bitcoin runs on a decentralized public ledger. There are no accounts, no central authorities, and no banks to verify transactions.
Instead, Bitcoin relies on a network of miners miners validate and confirm transactions, bundling them into blocks and adding them to the blockchain. In return for their efforts, miners are rewarded with both new Bitcoin (block subsidies) and transaction fees.
The block subsidy is a known amount that gets cut in half every 210,000 blocks—roughly every four years—in an event called the Bitcoin halving. This built-in mechanism controls the issuance of new bitcoins and will continue until the maximum supply of 21 million BTC is reached.
After 32 halvings, expected around the year 2140, no new bitcoins will be created. At that point—known as Bitcoin’s supply cap—miners will rely entirely on transaction fees for their revenue.
A Dynamic Fee Market
Transaction fees are what users pay to have their transactions included in a block. These transaction fees are not percentage-based like with credit cards. Instead, these fees are measured in satoshis per virtual byte (sat/vB) and based on the size of the transaction.
While the block subsidy is fixed, transaction fees vary due to supply and demand for block space. Key drivers of this volatility include:
Limited Block Space: Each block can only hold ~1–4 MB of data.
User Competition: When demand is high, users must outbid others to get confirmed quickly.
Dynamic Fee Markets: The mempool prioritizes higher-fee transactions in real time.
All unconfirmed transactions go into a temporary holding area called the mempool (short for memory pool). When the network is busy and the mempool is full, miners prioritize transactions with higher fee rates because they are more profitable.
The Golden Fee Days
Bitcoin’s fee market is highly reactive. Surges in activity—whether from trading, new protocols like Ordinals or Runes, or general congestion—can drive fees up sharply.
In both 2023 and 2024, the Bitcoin network experienced several fee spikes, including some prolonged periods of elevated transaction costs. These were largely fuelled by Ordinal inscriptions, the launch of Runes, and increased activity related to the Babylon staking protocol, all of which added significant transactional load to the mempool.
During the Bitcoin halving on April 20, 2024, users paid a record-breaking 37.7 BTC in transaction fees for block 840,000, amounting to over $2.4 million at that time. This surge was largely driven by heightened demand for block space due to the launch of the Runes protocol, which enabled users to inscribe and mint rare satoshis. Including the miner subsidy of 3.125 BTC, the total reward for mining this block was 40.7 BTC, approximately $2.6 million
Historic Lows Early 2025
After a weak second half of 2024, the downward trend in Bitcoin transaction fees extended into the new year. In January, fees per block averaged 0.046 BTC. The weakness continued into February and March, with average fees per block dropping to 0.043 BTC and 0.039 BTC, respectively — the latter marking a level not seen since March 2012.
Measured in USD, the situation looked slightly better but still underwhelming. Adjusting for monthly average Bitcoin prices, fees per block averaged $4,596 in January, $4,129 in February, and $3,313 in March. These levels reflect a persistently low demand for blockspace.
Two brief spikes in fee revenue were marked by outlier events. The first occurred between February 22–24, when a wave of BRC-20 $MASK mints caused average fees per block to surge over 130%, from 0.046 BTC to 0.107 BTC. The second came from a Taproot Wizards mint on March 25–26, driving a 112% spike in average fees, from 0.0406 BTC to 0.086 BTC. While short-lived, both events provided a welcome earnings boost for miners online during those periods.
Rock-Bottom Fees Regardless of Priority
Throughout the first quarter, there were multiple occasions when transactions—regardless of priority level, whether high, medium, low, or even zero—could be broadcast for the bare minimum fee of just 1 sat/vB, highlighting the persistently low demand for blockspace across the network.
Mempool Clearance
A notable indicator of low congestion was the clearing of the Bitcoin mempool, which occurred twice in Q1 2025 — first on February 1st and again toward the end of March. These were the only mempool clearances since April 2023, underscoring the current lack of transaction backlog and the resulting environment of short confirmation times and minimal fees. A cleared mempool signals temporary relief, it’s more a pause in activity than a permanent shift, it reflects a slowdown in demand.
The following content is exclusively for our Premium Members:
Future Perspective on Transaction Fees – 3 key factors that could influence transaction fees.
Mitigating Fee Instability in Mining – How to hedge against fee volatility applying alternative income streams and financial strategies.
