Attaching a bitcoin transaction fee can be a tricky business. Depending on the wallet or service you are using, it can be hard to know the exactly how much to pay for a quick confirmation. Paying too much can be a waste, while too little can delay a transaction greatly.
21 Inc. is a privately-held bitcoin hardware company founded by CEO Balaji S. Srinivasan. The company launched in May 2015, after the largest fundraising round in bitcoin history, and makes hardware products for the bitcoin niche. The main goal is “putting a bitcoin miner in every device and in every hand.”
The company started selling its first hardware product last September, the 21 Computer, which quickly rose to the #1 server product sold on Amazon.
21 then launched Bitnodes, which is being developed to estimate the size of the Bitcoin network by finding all the reachable nodes. These connection points make up the core of the bitcoin network. The free service is a handy reference for describing the bitcoin network size and geographic dispersion.
“With [Bitcoinfees] and the list of full nodes at bitnodes.21.co, we are trying to do our part to support some of the basic infrastructure of the Bitcoin ecosystem.”
– 21 Inc.
Bitcoinfees is based on open source code that Christian Papauschek originally published, as Cointape, on Github last year. 21 Inc have since picked up the software, re-branded it, and added a developer API.
The API has three primary requests that most applications and websites who send bitcoin may want to query. fastestFee returns the lowest fee, in satoshis per byte, for the fastest confirmations, usually 0 to 1 block delay. halfHourFee returns the lowest fee that will confirm transactions within half an hour, with 90% probability. hourFee returns the lowest fee that will confirm transactions within an hour, with 90% probability.
The accompanying web interface displays a chart that groups fees into tiers of 10 satoshis per byte. For each fee tier, the chart shows the number of unconfirmed and total transactions that day, as well as estimated delays in blocks and estimated processing time in minutes. The estimates are made assuming that higher fees will be picked up and processed by miners sooner and vice versa.
“For those who are manually sending transactions, you can use our web interface to determine how much you’ll likely need to send in fees to get a transaction through in a given amount of time.”
The data that the Bitcoinfees matrix provides can be used as an active reference for bitcoin users to make an informed decision regarding the network fee that suits their requirements. While it is common knowledge that smaller fees can mean longer processing times, this reference chart gives actual estimates of wait times per fee tier.
The chart also gives an insight into how many unconfirmed transactions are competing at the same fee level. A user wanting instant transaction processing can check the chart to avoid paying too little, risking transactions getting stuck in the queue.
The matrix also reveals a large number of users are paying too much for their transactions to be processed. One possible reason for this phenomena is that many wallets have baked in suggested fees that are unnecessarily high, so transactions would unlikely risk any delays.
There are also wallets that dynamically adjust fees as required, Breadwallet, Mycelium, and Copay for instance. Finding a wallet that lets you choose the transaction fee is harder, and few display the fee before sending the transaction.
Bitcoinfees estimates are of course past-performance-based predictions, with a touted 90% probability, based on fees that were transacted over the previous three hours. The 21 team says in their documentation that “a huge influx of new transactions can always change these numbers. Nevertheless, this tool works most of the time.”
“How large a fee you need to get rapid transaction confirmation can be hard to predict in advance,” 21 states. “Everyone else sending a Bitcoin transaction at the same time is effectively competing with you for the speed of inclusion into the Blockchain.”
A quick look at the web interface shows that 750 transactions were sent today with no fees, and there are 314 are still waiting for their transactions to be confirmed, which might be processed in one hour or could literally take forever.
The second tier, at least in this instance, shows where all the action is.
These transactions were sent with between one and ten satoshis per byte of data. This is the only tier where more unconfirmed transactions are waiting than have gone through already today, representing a mixed opinion of this fee across the range by miners. It’s not stopping transactions at this tier from being processed at all this time, but delays could be as long as 110 minutes.
The third or fourth tiers at this time are the obvious choices for most people. With a fee on the third tier, there could be a delay of up to 40 minutes maximum, whereas on the fourth tier only up to 20 minutes is expected, which is the same as paying any higher fee.
The lower the fees, the longer the delay, but with this data, a balance can be easily found ensuring that you pay as little as possible while still getting your transaction processed promptly.