What Is the Difference between a ‘Priority Fee’ and a ‘Base Fee’?
The base fee is a mandatory, algorithmically determined minimum price for inclusion in the next block, and it is burned by the protocol. The priority fee, or tip, is an optional extra amount paid directly to the miner or validator.
It serves as an incentive for the validator to prioritize the transaction, especially during periods of high network congestion.
Glossar
Fee Rate
Incentive ⎊ The Fee Rate serves as the primary economic incentive mechanism, compensating miners for expending computational resources to validate transactions and secure the blockchain.
Fee
Charge ⎊ A fee within cryptocurrency, options, and derivatives represents a cost associated with executing a trade, accessing a platform, or maintaining a position, directly impacting net profitability and requiring precise quantification for strategy backtesting.
Priority Fee
Incentive ⎊ The priority fee, often referred to as a tip, is an optional payment included in a transaction to incentivize validators to prioritize its inclusion in the next block.
Base Fee
Cost ⎊ The base fee represents the minimum amount required to include a transaction in a block on certain blockchain networks, notably Ethereum following the EIP-1559 upgrade.