What Role Does Transaction Size (In Bytes) Play in the Fee Calculation?

Transaction size, measured in bytes or virtual bytes (vbytes), is the fundamental factor in calculating the transaction fee. Fees are typically calculated as a fee rate, expressed in satoshis per byte (sat/byte).

The total fee paid is the fee rate multiplied by the transaction size. This is because the cost to the network is primarily related to the amount of data (block space) the transaction consumes, not the monetary value being transferred.

Larger transactions, which have more inputs or outputs, consume more block space and thus require a higher total fee to be competitive.