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Once set up with a bitcoin or bitcoin cash wallet and a few coins, using and sending them is pretty straightforward. Part of this process involves paying a transaction fee, which is a small amount of coin included in a transaction that incentivizes miners to work the transmission in one block. Both BTC and BCH transactions have fees, with much lower BCH fees. This post will detail some ways to find and track the best possible fees, set the transmission fees in your wallet, and make the most of this aspect of using peer-to-peer e-money.
Read also: How to get started with Bitcoin: buying, storing and spending cryptocurrencies
How transaction fees work
A transaction fee (tx) is a small amount of bitcoin included in a transaction that rewards miners for validating a payment, which results in a confirmation on the blockchain. Higher rates will typically result in faster transmission. Depending on the nature of the transaction, you may not be in a hurry to have it confirmed and you can set a lower fee in your wallet which could result in confirming the transmission in a later block. In a more urgent situation, a higher fee will cause your broadcast to be processed faster. This post will look at both BTC and BCH tx fees and how to make the most of them.
Monitoring of BCH and BTC rates
For starters, the highly customizable chart above from bitinfocharts.com, shows average BTC fees (blue) versus average BCH fees (red) over the past three months in USD. BCH fees are generally much cheaper thanks to a larger block size limit, which means more transactions can fit into each block and the network is less prone to congestion. When a network is congested, users set higher and higher fees to outrun each other’s bids so that their transaction is processed first.
Another site that displays rates in an easily digestible comparative format is bitcoinfees.cash, which displays the median rates of Bitcoin Cash and Bitcoin Core. “Typically, most people who use Bitcoin as their currency don’t want to wait many blocks before their transactions are confirmed,” claims the site, “so they pay the fees for the next block to get the transaction confirmed within 10 minutes. Median commissions are just the mid-range of all commissions to give users a better idea of the average amount paid by everyone, discarding high and low commissions. “
Transaction size as a factor
One thing the average user or crypto newcomer may not be aware of is that calculating an appropriate tx rate can be much more complicated than simply looking at the averages and medians. The size of the transaction (measured in bytes) also affects the miner’s incentive to take your transmission out of the mempool lounge and process it.
Miners are looking for value, so even if a high commission is paid, if the transmission size is huge, there is no guarantee that it will be processed quickly as others pay the same amount. This is why some portfolios offer highly customizable commission adjustment options and detailed broadcast information that can be used in conjunction with real-time network data to customize a commission. Fortunately for most users, however, the built-in fee estimators are reliable enough for general purposes, automatically taking into account the size of the broadcast and the rate.
For those who wish to see information on the current tx size on both BTC and BCH networks, charts.Bitcoin.com provides this resource.
Adjustment of fees in your Bitcoin wallet
Fees (often measured in satoshi per byte) can generally be settled in bitcoin wallets depending on the individual needs of the user. For users of the Bitcoin.com wallet – both desktop and mobile – there is a section titled “Network Cost Policy” in the settings menu. Once tapped or clicked, a new menu is displayed allowing users to select their own urgency level, with options such as “priority”, “normal” and “economy”. This takes some of the guesswork out of setting rates where manual adjustment might be difficult for beginners or inconvenient for everyday users.
Some wallets, such as the Electrum BTC wallet and the Electron Cash wallet for BCH, have a slider through which the tx fee can be manually adjusted.
In the Electron Cash wallet the satoshi / byte commission rate is set as an integer between 1 and 10. In the Electrum wallet for Bitcoin Core, the commission rate is set based on a target estimated time of arrival (ETA) block as shown in the image below. The Electrum BTC wallet also provides additional options to customize commission settings such as choosing to estimate based on mempool status or simply set a flat rate. Rates can also be manually changed and “batch” unconfirmed Replace-By-Fee (RBF) transactions (bundled into one transaction) to save on pricing.
This probably sounds complicated for newcomers to cryptocurrency and everyday users, which is a big part of why Bitcoin Cash features a larger block size limit than Bitcoin Core. The increased capacity allows for less congestion and negligible fees, often making many of the complications found in adjusting rates on the BTC network unnecessary. BCH’s Electron Cash wallet also allows you to set a custom commission rate, in addition to the default swipe options, but since RBF is not part of the Bitcoin Cash codebase for security reasons, RBF batches are not available in this wallet.
Timing of the transaction for the best rates
As with travel, sending a bitcoin tx is easier and more efficient when the roads are clear and traffic is light. If the side streets are clogged and you need to take a toll road, your journey will cost more. Also, depending on the time of day, there may be traffic jams or congestion at rush hour. Txstreet.com provides an excellent resource for viewing tx and mempool data, so that bitcoiners can see the best time to submit a transaction and a reasonable fee to pay.
When the best time to send a broadcast comes, it depends on a variety of factors. Price spikes can see network activity and, consequently, rates rise dramatically. For example, a few days after BTC’s all-time high in December 2017, the average tx fee in USD was over $ 37 per transaction. This has resulted in legions of everyday bitcoiners having to wait days to validate their tx. While this was certainly a special event, network congestion still plays a role in determining daily rates.
A very detailed resource to analyze the activity of both BTC and BCH mempool and tx and become familiar with the daily, weekly and market-related patterns over time can be found on Johoe’s Bitcoin Mempool Statistics. As the image directly above shows, the early morning hours of March 14 saw more unconfirmed transactions in the mempool than at other times of the day. The related “BTC Pending Transaction Fee” chart on the site shows generally higher fees during the same range.
The site observes: “The data are separated into different tariff levels expressed in satoshi per byte. The lowest colored stripe is for transactions that pay the lowest commission. Transactions with higher fees are stacked on it. Since miners prefer high-commission transactions, a new block usually only removes the top 1 MB from the queue. If a colored stripe persists for several hours without shrinking, it means that transactions paying this commission amount are not confirmed during this period, as there are higher paying transactions that take precedence. “
Sites like this and others can help bitcoiners, regardless of their preferred wallet or network, be sure to set a good broadcast fee that will help them save money and validate the transaction in a timely manner.
How do you find the best commissions when sending bitcoin or bitcoin cash? Let us know in the comments section below.
Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement or sponsorship of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or allegedly caused by or in connection with the use or reliance on any content, goods or services mentioned in this article.
Images courtesy of Shutterstock, fair use.
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