Transaction Fees

• •Definition: Payment to miners for including your transaction in a block.
• •Calculation: Sum of inputs minus sum of outputs (implicit, not explicitly stated).
• •Market-based: You compete with other users—higher fee = higher priority.
• •Measured in sat/vB: Satoshis per virtual byte (weight-based fee rate).
• •Voluntary but necessary: Technically optional, but zero-fee transactions rarely confirm.

• •sat/vB: Satoshis per virtual byte—the standard fee rate metric.
• •Virtual byte (vByte): Weight-adjusted size after SegWit (1 vByte = 4 weight units).
• •Fee market: Users bid for block space by setting fees; miners prioritize highest fees.
• •Fee estimation: Wallets estimate appropriate fees based on recent blocks and mempool.
• •Replace-By-Fee (RBF): Increasing a transaction's fee after broadcasting.
• •Child-Pays-For-Parent (CPFP): Recipient adds high fee to unconfirmed parent transaction.

Example:

• •Input: 0.1 BTC
• •Output 1: 0.05 BTC (payment)
• •Output 2: 0.0499 BTC (change)
• •Fee: 0.1 - 0.05 - 0.0499 = 0.0001 BTC (10,000 sats)

• •1-5 sat/vB: Very low priority. May take days or weeks. Only when mempool is empty.
• •10-20 sat/vB: Low priority. Next few hours to days. Good for non-urgent payments.
• •30-50 sat/vB: Medium priority. Next few blocks (30-60 min). Standard for most transactions.
• •100+ sat/vB: High priority. Next block (10 min). Urgent payments during congestion.
• •500+ sat/vB: Emergency. High congestion or extremely urgent.

• •Number of inputs: Each input adds ~68 vBytes (SegWit) or ~148 bytes (legacy)
• •Number of outputs: Each output adds ~31 vBytes (SegWit) or ~34 bytes (legacy)
• •Address types: SegWit/Taproot are smaller than legacy
• •Multisig: Multiple signatures increase size
• •Script complexity: Complex scripts (timelocks, etc.) add data

Example:

• •1-input, 2-output SegWit tx: ~140 vBytes
• •10-input, 2-output SegWit tx: ~700 vBytes (5x larger = 5x fee)

Wallets estimate fees using:

• •Recent block data (what fees got confirmed recently?)
• •Current mempool (how many transactions waiting?)
• •User urgency (slow, medium, fast confirmation)

Choosing a fee:

• •Too low: Transaction stuck in mempool, takes forever
• •Too high: Wastes money, but confirms fast
• •Just right: Confirms in target time (e.g., next 3 blocks)

Resources:

• •mempool.space: Visual mempool and fee estimates
• •bitcoinfees.net: Simple fee recommendations
• •Your wallet's built-in estimator

What is RBF?

• •Ability to increase fee on unconfirmed transaction
• •Broadcast a new version with higher fee
• •Miners drop old version, prioritize new one
• •Must be signaled when creating original transaction (sequence < 0xfffffffe)

When to use:

• •Your transaction is stuck (fee too low)
• •Network congestion increased unexpectedly
• •You need faster confirmation

How to use:

• •Many wallets support RBF (Electrum, Sparrow, BlueWallet)
• •Select stuck transaction, choose "Bump Fee"
• •Wallet creates new transaction with same inputs but higher fee

Limitation:

• •Only works before confirmation
• •Some services don't accept RBF transactions (wait for confirmation)

What is CPFP?

• •Recipient spends unconfirmed UTXO with high fee
• •Miner must include parent transaction to collect child's high fee
• •Effectively boosts parent transaction priority

When to use:

• •You received a transaction with too-low fee
• •Sender didn't use RBF (can't bump fee)
• •You need the funds confirmed urgently

Trade-off:

• •Recipient pays to speed up sender's transaction
• •Useful if you control both addresses

What drives fees up:

• •High transaction volume (bull markets, NFT mints, etc.)
• •Block space is limited (~1 MB per block)
• •Users bidding higher to get confirmed faster

What drives fees down:

• •Low transaction volume (bear markets, weekends)
• •SegWit/Taproot adoption (more efficient use of space)
• •Lightning Network (moves transactions off-chain)
• •Batching and consolidation

Long-term:

• •Block subsidy decreases every halving
• •Fees must eventually replace subsidy to secure network
• •Fee market will become more important over time

Why transactions get stuck:

• •Fee too low for current mempool conditions
• •Network congestion increased after broadcasting
• •Spending unconfirmed outputs (parent stuck = child stuck)