Looking to reduce fees on your upcoming Bitcoin transaction? Consider these strategies:
Timing is Key:
Bitcoin fees are notoriously variable, ranging from $1 in October 2023 to a high of $38 in December 2023, and back down to $5 as of January 2024. Unlike Ethereum, which has a strong daily and weekly gas fee cycle, Bitcoin fees don’t follow a predictable pattern. Only hold off on transactions if fees are exceptionally high.
Bitcoin Average Transaction Fee Chart
Opt for Segwit:
Using a Segwit address (starting with bc1) can lead to savings of 25-40% compared to Legacy addresses (beginning with 1). If you’re still using a pre-Segwit wallet, consider migrating.
Utilize Coin Control:
This involves selecting specific UTXOs (Unspent Transaction Outputs) for your transactions. For instance, in Electrum, enable the “Coins” tab to choose from specific addresses. Opting to send from fewer addresses, like one instead of ten, reduces transaction size and thus fees, particularly during high-fee periods. By contrast, when fees are low, it’s a good time to force your wallet to consolidate by only selecting low-value inputs.
Consolidate UTXOs When Fees Are Low:
Although this might affect your privacy, it’s crucial for activities like mining to periodically consolidate UTXOs during low-fee periods, preventing them from becoming economically unspendable.
Batch Transactions:
In Electrum, use the “Pay to many” option to send Bitcoin to multiple addresses in one go. Simply input each recipient’s address and amount on separate lines.
Choose the Right Fee Rate:
To balance speed and cost, select a fee rate that matches your desired confirmation time. In Electrum, slide the fee adjuster to pick a rate, ranging from the next block (e.g., 84 sats/vByte) to longer waits (e.g., 35 sats/vByte for 25 blocks).
[Advanced:] Set The Fee Just Above The Purge Threshold:
For the adventurous and patient, set your fee slightly above the purge threshold (currently 23.4 sats/vByte, as seen on mempool.space). This is risky; if fees rise, your transaction might be dropped from the mempool. In Electrum, a purged transaction shows a computer icon, indicating “stored locally.” If this occurs, you can either: increase the fee and resend (with Replace by Fee (RPB) or Child Pays For Parent (CPFP)), try to switch to a node with a larger mempool for re-broadcasting, or wait until fees go down to resend.
