Riding the wave, part 2: Choosing your own fees for fun and profit!

Now that we’ve reviewed the basic facts about Bitcoin network congestion and easy steps you can take to manage it in part 1 of this series, we can move on to selecting your own fees.

Modern wallets will automatically try to pick the best fee for your transaction at the time based on recent fees being paid by other transactions on the network, but this has it’s limitations. As I mentioned before, wallets will tend to underestimate fees when network congestion is on the rise. This will lead to longer wait times than you might expect. Worse, when network congestion starts to fall, wallets will tend to overpay, especially if you have no urgent need for your transaction to confirm. (see current congestion levels)

As a general rule, you might choose the HIGH or PRIORITY fee setting in your wallet if network congestion is rising or if you need an urgent confirmation. You might choose the LOW or ECONOMY fee setting anytime you can afford to wait for a confirmation, especially if you’re just sending bitcoin to another address you control.

Most users can choose between these basic fee levels and do not need to set a custom fee.


Satoshis Per Byte (sat/B)

The fee level is usually expressed in satoshis per byte, which represents how many satoshis (basic unit of Bitcoin = 0.000 000 01 BTC) the wallet is paying per byte of transaction size. The amount of bitcoin you are trying to send doesn’t actually contribute to transaction size. Rather, the number of inputs and outputs to your transaction determines its byte size. Most transactions are between 224-440 bytes (legacy). Wallets multiply their automatic or user-chosen satoshi/byte rate by the transaction size to determine the actual fee in bitcoin you will be paying.

Snapshot of fee level estimates on  BitcoinFees.Earn.com  from 4/16

Snapshot of fee level estimates on BitcoinFees.Earn.com from 4/16

You can see the impact of sat/B selection on confirmation times via one of the handiest Bitcoin sites around:

BitcoinFees.Earn.com

How To Select Your Own Fee

Using BitcoinFees.Earn.com, you can see how long it is estimated for transactions sent now to confirm in minutes (the right-hand column). Looking for the quickest confirmation? Use one of the satoshi/byte levels shown in green. Lower sat/B levels will take longer. Want to save on fees? Use one of the smaller sat/B levels farther up the chart, but pay attention to confirmation estimates! If you pick something too low you may be waiting days (or longer) for a confirmation with usually little recourse.

Something I’ve noticed in my time in customer service for Athena Bitcoin is that during periods when congestion is increasing (usually weekday mornings - mid-afternoon), these estimates don’t really hold. You should manually compensate and pay a higher amount than indicated depending upon the magnitude of the congestion. Likewise, when congestion is in decline you can usually get away with lower fees than this site would indicate.

Don’t forget!

Segwit transactions save you up to 40% on transaction fees for the same confirmation priority. Use a Segwit wallet and addresses that begin with "3" or "bc1". Move bitcoin sitting in legacy "1" addresses to your new Segwit addresses during periods of low congestion.

Websites and Wallets

Here is a list of fee estimation sites you can use to judge your fee level, along with a not comprehensive list of Segwit wallets where you can select your own fee rate:

  • Trezor (hardware) - Segwit-enabled “3” addresses & capable of direct sat/B entry

  • Ledger (hardware) - Segwit-enabled “3” addresses & capable of direct sat/B entry

  • Edge (mobile) - Segwit-enabled “3” addresses & capable of direct sat/B entry

  • Samouri (mobile) - Segwit-enabled “3” & “bc1” addresses with a good fee slider

  • HODL (mobile) - Segwit-enabled “bc1” addresses & capable of direct sat/B entry

  • Coinomi (mobile & desktop) - Segwit-enabled “3” addresses & capable of direct BTC/KB entry

  • Electrum (mobile & desktop) - Segwit-enabled “bc1” addresses with an okay fee slider (direct sat/B entry on desktop)