How are these transaction fee amounts even determined? With something like credit cards, PayPal, or EFT the fees are deterministic.
With Bitcoin it seems fees are both ridiculously high, plus I can't even tell what I am going to be charged?
With Bitcoin it seems fees are both ridiculously high, plus I can't even tell what I am going to be charged?
Since TX fees go to miners, they are incentivized to pick the transactions with the largest "fee per size" to include first to maximize their profit (though they aren't required to do so).
So basically you can envision all transactions as a stack, with the highest fees at the top. Once a block is found, it takes the top ~1MB worth of transactions, and the cycle repeats. [0] is a good visual representation of this.
Unfortunately this means there isn't an easy way to determine what fee will absolutely get you included in a block before it's mined, since if thousands of transactions show up with higher fees than yours after you (but before a block is mined) yours might not make it in the next block (even if your fee was the highest when you made the transaction).
It's a tough problem to solve, but there are some solutions being worked on to help solve this problem for the vast majority of bitcoin transactions.
And you are correct that bitcoin's ultimate goal is to have mining income come solely from transaction fees eventually. But by that point the hope is that "second layer" systems will take the brunt of the transactions and the actual core blockchain will only be a settlement layer where a $500 fee is no big deal for 2 banks settling hundreds of millions of dollars directly on the blockchain.
So if a fee is 150 "sat/byte" or satoshi's per byte. A satoshi is 0.00000001 of a bitcoin.
So if your transaction is 250 bytes (which is average for a single transaction to a single person), then you will pay (250 * 150) satoshis (37500 sat), which is about $5.
If your transaction is larger, you'll pay more, if it's smaller, you'll pay less.
But they are "ranked" in terms of who is picked first by "sat/byte" since the amount of room in the block is only 1MB.
So a 500 byte transaction with 37500 sats in fees is worth less than a 250 byte transaction with 37500 sats in fees, because the 500 byte transaction takes up more room that other higher paying transactions could fit in.
Sally and Bob each have 1 Bitcoin. Sally received her bitcoin to a single address. If Sally wants to send that 1 Bitcoin to Charlie, that transaction would have 1 input (the address she received it on) and one output (the address Charlie wants to receive it to). Bob has 1 Bitcoin total, but his 1 Bitcoin came from 4 x 0.25 transactions. Bob didn't want to reuse addresses, so for him to send 1 Bitcoin to Charlie he has a transaction with 4 inputs (each address which contains 0.25 BTC) and 1 output. Thus, Bob's transaction is much bigger than Alice's, despite the same amount of Bitcoin being sent.
Might be a nitpick, but you mean the miner puts as many high value transactions as they can fit into a block and then searches for a valid hash?
Technically the miner needs to know what they are going to be including in a block when they begin trying to find a valid hash, but for the sake of explanation I generally switch it around for simplicity.
Whenever you make a transaction in bitcoin, you point to the previous balance you have from a previous transaction, then you say how much you are sending to what address.
The "fee" is the difference between the amounts.
So if I have 1 Bitcoin, and I send .9 to you, the fee is .1
If you want to make sure you keep some Bitcoin, you just send it to yourself.
So 1 have one, and I send .1 to you, and .8 back to me, the fee is .1
Then when a miner mines a block, any unspent money is now theirs, and they claim it via the address they liked for.
The problem is that there are now so many transactions that are attempting to get through (And there is a maximum number of transactions that can be placed in a single block) that miners can be more selective. At this point your transaction is unlikely to get through without a minimum fee/bribe being provided because there are enough transactions with fees already at or above that level.
Every so many blocks, the number of new Bitcoin handed to the miners is halved, and eventually it will drop to zero. When that happens, the only incentive for miners to continue mining (And thus keep Bitcoin going) is the fees collected from the transactions. So required fees are only going to go up.
There is some compression at a storage level after blocks have been created, but it's not all that important. Pretty much all the data in Bitcoin is very difficult to compress with most of it being signatures, transactions, and addresses all stored in a binary format. The random nature of encryption makes it difficult to compress, and the formats have already been "hand tuned" for minimum size in many cases.
The number of transactions that can fit into a block (ie. "clear") is roughly fixed. The rate at which new blocks are added (ie. "clearing rate") is roughly fixed. Traders effectively bid for clearing via the transaction fee, and the highest bidding transactions are accepted.
In order words: supply of transactions is effectively fixed, and demand for transactions determines the fee.
There is work going on to enable external clearinghouses called the lightning network that will fix this problem, but that work isn't ready yet.