Byte

A byte is a unit of digital information consisting of 8 bits, where each bit is a single binary value of 0 or 1. Bytes are the basic accounting unit for data in computing, and in Bitcoin they measure the size of transactions and blocks. A typical single-signature bitcoin transaction occupies roughly 140 to 250 virtual bytes.

Why it matters

Block space is the scarce resource of the Bitcoin network, so bytes are what users actually bid for. Transaction fees are quoted in satoshis per virtual byte, meaning a transaction's cost depends on its data size, not on the value it moves. Sending 1 billion dollars can cost less than sending 50 dollars if the smaller payment is built from many fragmented outputs. Keeping blocks small in bytes is also what keeps running a full node cheap, which protects decentralization.

How it works

Since the Segregated Witness upgrade in 2017, Bitcoin measures blocks in weight units, with a limit of 4 million weight units per block. Signature data is discounted, so a virtual byte equals 4 weight units and blocks work out to roughly 1 to 4 megabytes of raw data depending on transaction mix. Wallets estimate a transaction's virtual size from its inputs and outputs, multiply by the prevailing fee rate, and attach the result as the fee.