How To Calculate Bitcoin Transaction Fees

Are You Paying Too Much for Your Bitcoin Transactions?

One month ago Bitcoin transaction fees were sky high, sometimes exchanges were charging as much as £3 - £4 to send only £10 worth of Bitcoin. You always had the ability to send Bitcoin transactions with custom fees, which allowed you send the transaction with more or less fees, which in turn would either speed up the transaction or made it take longer accordingly. It was not unheard of for small transactions with low fees to spend MONTHS lost on the blockchain, stuck in some mempool somewhere being ignored by miners favouring higher fees. Larger transactions with higher fees means less transactions per block and therefore less work for miners to achieve the same block reward. The Bitcoin transaction fees became so outrageously high that many cryto-traders began favouring smaller, lower value altcoins for their transactions and liquidity, and this added to the recent correction in Bitcoin value.





The chart above shows the number of unconfirmed transactions verses the total number of transactions made against the transaction fee paid, generalising to within 10 Satoshi. As you can clearly see from the chart, the sweet-spot for transaction fees is currently between 21 and 30 Satoshi per byte. But what does this mean?

Basically this means that of the 97,234 transations made on that day, only 191 transactions remained unconfirmed for longer than 25 minutes or 1 block. That is, transactions made with a fee of between 21-30 Satoshi/byte were confirmed within 1 block (the first block they were added to). 191 out of 97,234 means only 0.2% of all transactions for that period were still unconfirmed for more than 1 block. Transactions with less fees were slower to confirm and became added to later blocks, more often.

Decreasing the fee by only a small amount meant that transactions were confirmed more slowly, although increasing the transaction fee did not speed up the confirmation time significantly. Not surprisingly, because successful transactions were added to the next available block and confirmed immediately, regardless of the greater fee attached to the transaction.

How do I calculate the fee and know what to send?

Most people are concerned about the total transaction fee as a percentage of their transaction so they are happy to send larger transactions with higher fees, but this is not really how the fee calculation works. So you could be paying more for your transaction than you need to.

• You can use this chart which is located at earn.com and use it to check your fees are within the successfully confirmed transaction fee range (which is what I do).
• Bitcoin transactions are actually measured in bytes of data, much like a file on a computer, and it costs a certain amount to send that file across the blockchain. So the fee is calculated in terms of cost (in Satoshi) per byte of information. So, if a transaction is 260 bytes and the fee is recommended at 25 Satoshi per byte, the actual Bitcoin send fee will be 260 x 25 = 6,500 Satoshi or 0.00006500 BTC (or £0.52 GBP). As you can see this fee is much more realistic, even if you are only sending £10 your transaction will still be confirmed on the next available block. As another example, I sent 0.00160621 BTC to my Steemit account recently. The exchange recommended the fee to be only £0.09. This sounded a bit low to me and from experience I have had similar sized transactions get stuck on the blockchain before, so I took a moment to check the chart, increased the fee to 32 Satoshi/byte and the total fee came out at 0.00007232 BTC around £0.58. The transaction went straight through on the next block and confirmed within a matter of seconds. To me, the extra fee was worth it, but here lies the irony: single transactions for larger amounts of bitcoin DO NOT NECESSARILY NEED TO HAVE LARGER FEES because the size of the transaction might only be a few bytes greater, and therefore the number of Satoshi/byte will not increase the fee significantly. Even if you increased the fee it will not make the send confirm any faster.
• The way the number of bytes is calculated is actually a little bit complicated and not always consistant. The number of bytes is calculated according to inputs and outputs and a single transaction might have multiple intputs and outputs. Generally speaking the fee structure for a single transaction with single inputs and outputs is like this : each input will contribute 180 (plus or minus 1) bytes to the transaction and each output adds 34 bytes to the transaction and there is always an extra fixed fee of 10 bytes. Which would give: 180 + 34 +10 = 224 bytes. It gets a bit more complicated with transactions with multiple inputs and outputs. For example, a transaction of 40 inputs and 16 outputs gives a transaction size of (40 x 180 +/-40) + (16 x 34) + 10 = 7754 +- 40 bytes. The actual size was 7761 bytes. Therefore a fee of 30 Satoshi/byte would be 30 x 7761 = 232,830 Satoshi or 0.00232830 BTC or £18.77 GBP. While this might sound expensive, bear in mind this transaction was for a total of 891 BTC which can be seen here.
  
  

Where do I find the byte size of my transaction?

Unfortunately, not all wallet providers tell you the size of the transation in bytes before you send Bitcoin. If this is the case, it is probably best to either estimate the byte size (based on the links above) or if you know the transaction size in bytes you can make a much better estimation. Once the transaction is sent you can find all the information on a blockchain explorer like Blockchain.info.

If you find the fees are still unacceptably high you might consider your exchange is charging you a fee to send Bitcoin on top of the actual transaction fee... but at least now you will have a way to find out and also to know the correct fee to send to allow your transaction to be confirmed smoothly and in a timely manner!

For further reading, follow this link. All the information in this post was provided by earn.com. Earn also offer a blockchain backed network of early coin adopters and provide the opportunity to join free airdrops of newly launched coins. You even get paid in Bitcoin to read the emails!

For more information follow this link or sign up here.

Have a great day and I hope this saved you some Bitcoin on your transaction fees!

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Matt Blythe
http://www.innervision.org.uk

Matt is the owner of Inner Vision Press, Inner Vision Personal Development and Inner Vision Photography. He is the Director of two companies and is the Author of the book "Enlightenment for Beginners". Matt also has experience trading currencies on the Foreign Exchange and investing in High Yield Investment Programs.

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