Miners are paid in two ways - from creating new bitcoins and from transaction fees. The transaction fees are small but add up to enough to make it worth mining.
So how does one make money as a miner via processing these fees? Is this money being taken by pools, individual miners? Who is the middle-man that is actually taking this profit?
miners are getting payed for every transaction. if you don’t include transactions fees your transaction will spend a lot of time in limbo and may actually never be mined.
the way it works, let’s say you have A bitcoins and you want to pay someone B bitcoins. you create a transaction that say: I want to move A to B and A-B-fee
the miners see it and see the fee. it gets included (ie mined) in a block.
actual example 50BTC -> 20BTC + 29BTC
when the miner mines it, it will send the tx fee to its own wallet
also, most miners sort transactions by the most profitable to less profitable and mine only the most profitable ones
Miners will be paid with transaction fees. Already if you don't include a fee in your transaction you can expect much longer transaction confirmation times or to never receive confirmation because miners already try to pack the most fees into each single block to maximize their payout.
Transaction fees are paid to the miner who solves the block containing your transaction. It's an incentive for the miner to include your transaction in the block. Without fees, your transaction will get processed eventually, but miners tend to put profitable transactions first.
Eventually, the block reward will be very small and transaction fees will be the only profit miners make. So you're basically paying the miners to protect the network by verifying the transactions.
Not the fee, the costs, block reward divided by transactions in the block. Miners will use that to cover their electricity bills and you are paying for this indirectly when you buy Bitcoins.
Ah interesting, that makes sense. Can miners set their own transaction fees? And related if I want to make a bitcoin transaction can I (or my software) choose which miners to use to verify those transactions? Or are those fees determined by the protocol itself?
"Bitcoin miners don't take anyone else's money in exchange for verifying transactions."
Yes they do. Your whole point, I thought, was that they're being paid to do it. They presently take a small fraction of value from every bitcoin. They also receive any transaction fees offered by any of the transactions they are processing, but in practice those are presently (almost?) always zero.
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