What Is a Network Fee?

A network fee is the amount paid to have a transaction included in the next block. Depending on the network, that amount is set through open bidding among everyone waiting to transact, a formula the protocol itself adjusts automatically with demand, or some combination of the two, but in every case, no company fixes the price.

Why block space is limited

Each block on a decentralized network can only hold so many transactions, and new blocks are produced on a fairly steady schedule. That combination puts a hard ceiling on how many transactions the network can process in a given stretch of time. When more transactions are waiting than a block can fit, something has to determine which ones go in first.

How the fee actually gets set

On networks like Bitcoin, the parties producing the next block generally prioritize whichever waiting transactions offer the highest fee, since that's how they're compensated for the work of including them. Anyone sending a transaction attaches a fee they're willing to pay, and when many people are transacting at once, that competition pushes typical fees up; when fewer transactions are waiting, fees drop back down. Other networks split the fee into two pieces: a base amount the protocol itself raises or lowers automatically depending on how full recent blocks were (Ethereum's EIP-1559 mechanism works this way), plus an optional priority payment a sender can add to be included faster. Either way, nobody sets a fixed price list; the fee tracks how busy the network actually is.

Why it isn't a service charge

A service charge is set by a company, applies uniformly, and goes to that company. A network fee has none of those properties: it changes constantly with demand, different people pay different amounts for the same kind of transaction at the same moment, and it goes to whoever does the work of producing the block rather than to any central operator. It reflects how busy the network is right now, not a fixed cost of the service.

For a live view of how busy a network currently is, see Network Monitor, and for how this and other terms relate, see the glossary.