Guides / Glossary / Fee rate
Glossary

Fee rate: how bitcoin transaction fees are priced

What a transaction pays per unit of size, usually quoted in satoshis per virtual byte.

Education only

Definition. What a transaction pays per unit of size, usually quoted in satoshis per virtual byte (sat/vB). Miners tend to include higher fee rates first.

How it works

Blocks have limited space, so transactions compete for inclusion. Miners generally choose the transactions that pay the most per unit of space. Since SegWit, space is measured in weight units, and BIP 141 defines a virtual byte as a quarter of a weight unit. The fee rate is the fee in satoshis divided by the transaction's size in virtual bytes.

The total fee is therefore the fee rate multiplied by size. Size depends mostly on the number of inputs and outputs and on the script type. A multisig input is larger than a single key input because it carries more signatures and the script, so multisig spends cost a little more at the same fee rate.

Why it matters for a company

Fees vary with demand. In busy periods the rate needed for quick confirmation can rise many times over the quiet rate. A company that has to pay a supplier by a deadline may need a higher fee rate; a company moving funds between its own wallets can usually wait for a lower one. Wallets show fee estimates from recent blocks and the mempool, but they are estimates, not quotes.

Fees also have accounting and tax effects. Each fee is a cost of the transaction, and it is paid in bitcoin. In the US, Treasury regulations treat digital assets used to pay transaction costs as a disposition. In the UK, the bitcoin used to pay a fee also leaves the pool, and allowable cost rules decide how the fee is treated. Ask the accountant how to record fees consistently.

Example only, fictional. A company's policy sets a default fee rate for routine internal transfers and allows the signers to choose a higher rate for time sensitive payments, recording the reason in the payment log. The fee in satoshis and its sterling or dollar value are captured for each transaction.

Common mistakes

Sources

Primary sources only. Each link was checked on 9 November 2026. Rules change, so confirm the current version with your adviser.

  1. Bitcoin developer documentationGlossary: one bitcoin equals 100,000,000 satoshis
  2. Bitcoin BIPsBIP 141: Segregated Witness (consensus layer)
  3. Bitcoin OptechTopic: fee estimation
  4. Bitcoin OptechTransaction size calculator
  5. eCFR26 CFR 1.1001-7(b)(1)(ii): digital assets used to pay transaction costs are a disposition
Education, not advice.

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