Pricing Settlement Priority: Structural Evidence from Bitcoin Transaction Fees

Abstract

Bitcoin fees allocate scarce settlement priority and finance proof-of-work security, but paid fees also contain wallet and payment wedges. Using 18.26 million first-seen mempool transactions, we estimate a structural priority-queue model that maps fee ranks to confirmation outcomes. Structural priority prices are 4.3% of fitted mean paid fees; a re-estimation bootstrap gives a 2.5%-10.1% interval. Capacity expansions lower fees and delays; fee floors raise payments without improving confirmation. Because fees are only 0.56% of current miner rewards, security effects are small today but first-order in fee-only futures.