How to Calculate Bitcoin Transaction Fees When You’re in a Hurry
Kai Sedgwick November 28, 2017 Latest news 0
Calculating transaction fees is like riding a bike or rolling a cigarette: simple when you know how, but frustratingly complex otherwise. UX improvements over the last few years have made bitcoin easier than ever to send and receive, but fee calculation is still something of a dark art. The following resources make fee calculation a doddle. See also: The Curious Case of the New ‘Dragonmint Bitcoin Miner’
Taking a Byte out of Your SatoshisIn this life, nothing comes for free. You wanna send bitcoin, you’ve got to pay the piper, namely the miners whose machines secure the network and confirm the hundreds of thousands of transactions that pass through it every day. Back in the day, when one bitcoin cost tens or hundreds of dollars, no one paid too much attention to fees; they were so small as to be unimportant, which is why sites like Satoshi Dice were able to flourish, permitting idle bitcoiners to send scores of micro-transactions over the blockchain with scant regard for fees.
Where Do Transaction Fees Go?In addition to earning a reward for solving the next block, miners receive the fees attached to any transactions on that block. The current reward per block is 12.5 BTC, but the miner may receive a figure closer to 13 BTC by the time fees have been added on. Although there is technically no obligation to attach fees to a transaction, there is also no obligation for the miner to include any transaction in the block they’re confirming. Thus it makes sense to include a fee to incentivize the miner to add the transaction to the block. Miners prioritize transactions with the highest fee per byte, which is why senders who are in a hurry will pay a surcharge to push their transaction to the front of the queue. Pay the highest possible fee and your transaction should be confirmed within the next block, which will take an average of between 5 and 15 minutes. Pay lower fees and your transaction should be confirmed within the next three blocks, which will generally take between 10 and 30 minutes.
Transaction Fees Made EasyAs bitcoin has risen, so have the corresponding fees (for reasons that aren’t always related to the price of BTC it should be noted). Who’s gonna pay for their skinny turmeric latte with bitcoin if the fee costs more than the coffee? Thankfully that’s not always the case; fees rise and fall, and there are ways to push through low-cost transactions. If you’re sending from a segwit address and aren’t in a hurry, fees of under $1 are achievable. Perhaps not ideal if you’re still chasing that coffee, but for medium to large transactions, still doable. Search “how to calculate bitcoin fees” and you’ll be presented with mind-boggling explainers like the following: Online explanations, while accurate, aren’t much use to the average layman.
Fee Calculation Without the CalculatorTurn to some of bitcoin’s more experienced heads for fee advice, and you may emerge with more questions than answers. “What do you mean you don’t know how to calculate transaction fees? It’s simple: all you gotta do is work out the size of your transaction in bytes, multiply it by the median byte size, take the answer in satoshis, divide it by 100 million (or 1e8 on a scientific calculator), get the answer in bitcoin and then convert to USD. Piece of cake.” Thankfully there’s an easier way. Many hardware and web-based bitcoin wallets already come with built-in fee calculators which do a pretty good job. But not all wallets are similarly equipped, and the majority of sites, from cryptocurrency exchanges to deep web stores, still leave it to the customer to calculate fees. In such situations, the following tools are invaluable: Estimatefee.com is a simple website that calculates the cost (in satoshis and USD) for a bitcoin transaction based on how much of hurry you are to move your coins from A to B. At the time of publication, fees are between $3 and $6 for sub-1-hour transactions. Bitcoinfees.info displays slow/medium/fast fees in USD with no muss and no fuss. Bitcoinfees.earn.com is another prediction tool, but you’ll need to be fluent in satoshis to grasp this one. For those who are still mystified by satoshis and what they mean in fiat terms, this satoshi to USD converter will come in handy. It may seem frustrating that there isn’t a simpler way of determining fees, but due to the way bitcoin works, the price you pay depends on a number of factors including the size in kilobytes i.e the amount of data that makes up the transaction. That’s why segwit sends are generally cheaper: because you’re transmitting less data over the network. The blockchain is a bit like a highway in that it can get congested at peak times. If you’re not in a hurry, wait till the number of unconfirmed transactions in the mempool drops, taking the average transaction cost down with it. If you’re new to bitcoin, fees can be fiendishly tricky to get your head around. Use an online fee estimator to do the math and leave the minutiae of satoshi per byte calculations to the experts or to your wallet’s built-in estimator. What’s your go-to tool for calculating transaction fees? Let us know in the comments section below.
Images courtesy of Shutterstock, and Satoshi Dice.
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