What Happens if I Set the Lowest 1 Satoshi Transaction Fee?
Have you ever wondered what Bitcoin transaction fees are all about? Do you know how they are calculated? If you think that it’s not important, you’re missing out. When you understand the insides of a transaction fee, you can save some money on it.
Here’s what you should know about it.
Dust, Low Fees, and Stuck Transactions
Low fees are not the only reason transaction fees get stuck. On rare occasions, you may be sending funds that come from an unconfirmed transaction. Or the outputs of your transaction contain dust.
Dust is a very small amount of Bitcoin, from 1 to approximately 1000 Satoshi, and occasionally it is generated when people send BTC back and forth. The problem with dust is that the value of these coins is smaller than the fee required to send them. Dust transactions spam and decelerate the network, and are often ignored and returned to the sender.
If a low transaction fee is the issue, your transaction will be marked as a low priority, and there are three possible outcomes.
- Highly unlikely but it happens. Sometimes miners will include such transactions in a block and you won’t even have to wait.
- Your transaction will get stuck in the mempool and you’ll have to wait for a while until eventually it is confirmed. Your wallet will keep on sending this transaction to the pool until it finally goes through.
- If your transaction gets stuck for too long, after a certain amount of time when the mempool renews (from 3 days to 2 weeks) the funds will be returned to you.
To avoid these issues, I would recommend using Fast transaction fee in Lumi. But if you’re determined to set your own custom fees, use this website to estimate the most advantageous ones.
How to Save on Fees?
Sometimes, your transaction fees can be significantly different even when you send the same amount of crypto. Why does this happen?
Just like with cash, Bitcoin can be divided into pieces. If you own $100, you can have it in one bill, or you can have one hundred dollars in coins. Same with crypto — you can own 1 BTC that you received in a single transaction or 100 smaller ones. Nobody likes to deal with too many fractional coins and when dealing with crypto you’ll have to pay more for using “the change”.
The crypto transaction fee doesn’t depend on how much money you send, but on the weight of the entire transaction. So basically, you pay a fee per byte because that determines how much work miners have to do to confirm your transaction. And obviously, when miners choose which transactions they include in the blocks, they always go for the ones with the highest BTC per byte.
The weight of the transaction, in turn, depends on the number of inputs and outputs it contains. This 1 BTC that you want to send may consist of dozens of transactions and each of them will add a new input and make the total transaction heavier.
Let’s say, you’re doing some freelance work and your employer pays you every time you finish a task. In one month you’ll receive around 5 money transfers totaling 0,1 BTC. Then you decide to pay your rent and send 0,05 BTC to your landlord and pay five times more for this transaction. That happens because each output increases the cost, in your case the fee will be 5 times higher. Instead, you could have asked your employer to pay you once and when transferring money to your landlord you’ll be creating one output and have to pay for only one input. Profit!
And here’s a Bitcoin fee calculator to see what fee you’ll have to pay. You see that the number of in and outputs changes the sum quite drastically.
The Bottom Line
So what have we learned today? Even if you’ve set a really low transaction fee, your money will eventually come through or you’ll get it back. There are always better to check what fee you should choose before sending the transaction: the higher the fee, the faster it’ll be finalized. And if you want to save on fees, it is always cheaper to send fewer transactions with a higher value.
Originally published at https://blog.lumiwallet.com on June 22, 2020.