Now that we’ve talked about block rewards, let’s go ahead and talk about transaction fees.
Transaction fees are the second form of profit for miners.
The transaction fee is a price set by the sender of a transaction.
You can consider the transaction fee the cost of service for using the power of the Bitcoin network.
Providing transaction fees are not required for a transaction to go through, but they incentivize miners to consider choosing your transaction over other ones due to limited block space.
Because a miner can only approve so many transactions at once given the one megabyte size limit, they will want to choose the transactions that give them the most profit within that block.
In fact, the way the miner calculates the transactions they will collect into a block is through maximizing the ratio of transaction fees to unit of storage.
What this means is that the overall transaction fees for their block will be maximized, as they’re taking all the most profitable transactions.
Notice one thing: as the block reward diminishes, transaction fees will go up if miners seek the same amount of profit in bitcoins.
As block rewards approach zero, transaction fees will become the primary source of revenue for miners.