The priority fee is an optional fee that is paid entirely to miners and can be set freely by the users before each transaction. It is also commonly referred to as the miner tip. The goal of this fee is to incentivize the miners to add the transaction in the next generated block. Although technically optional, it is recommended to set a minimum amount of at least 2 Gwei to be able to have the chance of having the transaction included in the following blocks.
💡 How can I use it?
The priority fee, also known as the "miner tip", provides an important source of incentivization within the Ethereum network, especially following the implementation of EIP-1559. Here's how this indicator can be useful:
By setting a higher priority fee, users can incentivize miners to prioritize their transaction over others, making it more likely that the transaction will be processed in the next block. This can be particularly useful during periods of high network congestion when users need their transactions processed quickly.
Understanding the average priority fee at a given time can provide insight into the network's current state. Higher average priority fees could suggest higher network demand and congestion, while lower fees could suggest the opposite.
For those interested in Ethereum's incentive structure, the priority fee provides a measure of the rewards that miners receive for processing transactions. This could help understand how miners are incentivized and how changes in the network's rules or market conditions might affect their behavior.
By knowing the range of priority fees, users can better estimate their total transaction cost and manage their finances accordingly. This is especially important for businesses and individuals that perform many transactions on the Ethereum network.
Finally, Changes in priority fees can also reflect market behavior and sentiment. For instance, during periods of high market volatility, users may be willing to pay higher priority fees to expedite their transactions, which could indicate a rush to buy or sell assets.