Every transaction on the Liquid Network includes a fee, paid in Liquid Bitcoin (LBTC). Liquid transaction fees work in a similar way to transaction fees on Bitcoin, which are paid in bitcoin (BTC).
Transaction fees for all transfers on Liquid are always paid in LBTC. That means when sending any Liquid asset (e.g., USDT), the sender needs to hold a small amount of LBTC to pay the transaction fee. On Liquid, the sender is responsible for the payment of transaction fees; the recipient does not need to hold LBTC in order to receive a transaction.
Why Does Liquid Have Transaction Fees?
Liquid transactions include a fee to mitigate the risk of Denial-of-Service (DoS) attacks, in which a malicious user would send a large number of transactions at zero cost to either fill up block space or the mempool and prevent other transactions from being completed.
Who Receives Liquid’s Transaction Fees?
Liquid transaction fees are sent to a wallet controlled by Blockstream. The fees are used in part to pay the Bitcoin mainchain fees required for LBTC peg-outs from the Liquid sidechain to the Bitcoin mainchain and thereby indirectly facilitate free peg-outs for network users. Fees are also utilized to manage the Liquid Federation's mainchain BTC wallet.
How Are Fees on Liquid Determined?
Similarly to Bitcoin miners, Liquid functionaries prioritize transactions with higher fees when selecting transactions to include in a block. As a result, like Bitcoin, a fee market exists on Liquid: when block space is in high demand, users may compete to have their transactions included in a block sooner by paying higher fees.
Currently, the lowest possible transaction fee on Liquid is 0.1 satoshi/vbyte (one-tenth of the minimum fee on Bitcoin), which at the time of writing is typically sufficient to get a transaction into the next block. This may change as Liquid becomes more popular and traffic on the network increases.
Liquid’s total transaction capacity (transactions per second) is similar to that of Bitcoin’s.
Controlling Your Transaction Fees
Blockstream app is equipped with a fee control feature that allows you to select from three transaction speeds (slow, medium, fast), which estimates the fee value based on the required confirmation time. In addition, you have the option to manually enter a custom transaction fee.