Floating fees in Bitcoin Core 0.10

Retrieved from the Wayback Machine.

The latest release of the Bitcoin reference implementation has 2 new RPC commands related to fees: estimatepriority and estimatefee. They work by statistically observing the blockchain.

estimatepriority <nblocks>

Estimates the approximate priority a zero-fee transaction needs to begin confirmation within nblocks blocks.

The priority of a transaction can be calculated using the following formula:

priority = sum(input_value_in_base_units * input_age) / size_in_bytes

That is, the sum of the number of satoshis in each input multiplied by their age in blocks, divided my the total size of the transaction. The maximum size for a regular transaction can be determined from the number of inputs and outputs:

size_in_bytes = 149 * inputs + 34 * outputs + 10

The simplest transaction is defined as having 1 input and 2 outputs (227 bytes). In theory you could have just 1 output, but then you have no means to control how much of the input you are spending because there is no change address.

Previously the reference implementation would allow transactions into a block for free if they have a priority greater than 57,600,000. It also had to be smaller than 1,000 bytes and have all outputs  0.01 or larger. Other implementations and miners have different settings, so it is hard to know what priority is really required.

Now with the estimatepriority command it is possible to determine what priority is required on average to get a transaction into a block for free within nblocks. At the time of writing it is reporting 15,075,940,700 for nblocks = 1. This is 262 times greater than the previous reference implementation and perhaps a more realistic representation of the current behaviour of miners. This means to send  1 for free in the simplest transaction it would need to be 238 days old.

For it to confirm within 25 blocks it would need to be 12 days old. It's probably not worth endeavouring to not pay a fee on a transaction as for just $ 0.04 you are almost guaranteed to get the simplest transaction into the next block.

In fact, by default in 0.10 the reference Bitcoin wallet does not attempt to send zero-fee transactions.

estimatefee <nblocks>

Estimates the approximate fee per kilobyte needed for a transaction to begin confirmation within nblocks blocks.

I have added a transaction fees report page to my Coin Tools Drupal module. For all values of nblocks supported, it displays the average time for a transaction to confirm, the fee per kB, and the fee for the simplest transaction.

Below is a verbatim paste of the HTML table generated by Coin Tools at the time of writing:

https://blog.bitcoinfoundation.org/floating-fees-for-0-10/