In the previous lesson, we explained that Base Fee and Priority Fee are the two components of the Ethereum EIP-1559 fee model, and together they form the total transaction cost paid by users. In the last lesson we already explained Base Fee, and in this lesson we will continue with a detailed explanation of Priority Fee.
So let’s talk about it: What exactly is Priority Fee, and why is it so important in blockchain transactions?
Starting with the Concept
Simply put, Priority Fee is a small tip paid by users to have their transactions included in a block more quickly.
In a blockchain network, the capacity of each block is limited. At any given time, there may be many transactions waiting to be included. When miners or validators select transactions, they usually prioritize those with higher fees. Therefore, users can choose to pay an additional fee to increase the priority of their transaction.
This additional fee is the Priority Fee.
In other words, Priority Fee is essentially an acceleration fee. If you want your transaction to be confirmed faster, you can increase this fee.
If you are not in a hurry, you can set a lower Priority Fee and wait until the network becomes less congested.
The Difference Between Priority Fee and Base Fee
In modern blockchain networks such as Ethereum after the London Upgrade, the gas fee structure was redesigned to make transaction fees more transparent and predictable.
Previously, users had to estimate Gas prices themselves, which often led to paying too much or waiting a long time for confirmation. The new fee mechanism introduces a structured model that stabilizes fees and improves network efficiency.
The new fee structure consists of two parts.
1. Base Fee
Base Fee is automatically calculated by the network and changes dynamically depending on block congestion:
When block usage increases, the system automatically raises the Base Fee to reduce excessive transaction demand. When network demand decreases, the Base Fee gradually drops to encourage more transactions.
More importantly, the Base Fee is not paid to miners or validators. Instead, it is burned.
This design has become a key part of Ethereum’s deflationary mechanism. As on-chain activity increases, more ETH is burned, which can reduce circulating supply over time.
2. Priority Fee
Priority Fee is an additional fee voluntarily paid by users to increase transaction priority.
When there are many pending transactions, validators tend to select those with higher Priority Fees first.
Unlike Base Fee, Priority Fee is not burned. It is paid directly to the block producer. For miners or validators, this fee acts as an immediate reward and an incentive for maintaining the network and producing blocks.
Priority Fee Creates a Reference for Transaction Priority
The introduction of Priority Fee solves a practical problem: when the network is congested, how do we decide which transaction should be processed first?
If every transaction paid exactly the same fee, miners or validators would lack a clear sorting mechanism when selecting transactions.
Since block capacity is limited, when the number of pending transactions exceeds block capacity, a method is required to determine priority.
Priority Fee provides a simple and effective mechanism that allows users to decide how urgent their transaction is.
In other words, users can pay a higher Priority Fee to give their transaction higher priority and increase the chance of faster confirmation.
Situations Where Priority Fee Becomes Very Important
In time-sensitive scenarios, Priority Fee becomes extremely important.
For example:
In DeFi liquidation transactions, a delay of a few seconds may cause you to miss the liquidation opportunity. During NFT mint events, being slightly slower may mean missing a popular project. In arbitrage trading, price differences often exist only for a very short window.
In these situations, users usually set a higher Priority Fee to increase the probability of faster inclusion in a block. In these cases, time is more valuable than transaction cost.
On the other hand, for ordinary transactions — such as sending assets to a friend or moving funds between wallets — users generally do not need extremely high priority.
In such cases, users can set a lower Priority Fee, or even close to the minimum level, and wait until the network becomes less congested.
Therefore, Priority Fee effectively creates a “transaction priority market.”
Each user can freely decide how much they are willing to pay for transaction speed.
This mechanism not only improves transaction ordering but also helps the network maintain stability under heavy load.
The Relationship Between Priority Fee and MEV
In complex transaction environments, Priority Fee is often related to MEV (Miner Extractable Value).
MEV refers to the extra profit miners or validators can obtain by adjusting transaction order or inserting transactions into a block.
For example, in DeFi trading, arbitrage traders may pay extremely high Priority Fees to ensure their transactions are executed first and capture arbitrage opportunities.
Therefore, in real blockchain networks, it is common to see certain transactions paying extremely high Priority Fees. This usually indicates that those transactions involve:
Arbitrage
Liquidations
Other high-value financial operations
The Impact of Priority Fee on User Experience
The design of Priority Fee also improves the overall blockchain user experience.
Under the traditional gas model, users constantly had to guess:
“How much Gas should I set for my transaction to go through?”
If the gas price was too low, the transaction might remain pending for a long time. If it was too high, users wasted money.
Under the new fee structure:
Base Fee maintains the overall network fee level.
Priority Fee only adjusts transaction priority.
This simplifies user decisions. Users only need to decide how much they are willing to pay for speed.
Conclusion
Priority Fee is an important component of modern blockchain transaction fee systems.
Its core functions can be summarized in three points:
First, it determines transaction priority. Users can pay a higher Priority Fee to have their transactions included faster.
Second, it provides additional incentives for miners and validators. Unlike Base Fee, Priority Fee becomes direct revenue for block producers.
Third, it improves network efficiency by allowing users to adjust transaction speed through market mechanisms.
As blockchain ecosystems continue to evolve, transaction fee structures are also continuously improving. Mechanisms like Priority Fee not only enhance network efficiency but also make the entire system more market-driven and sustainable.
