How to pay less bitcoin transaction fee

How to Pay Less Bitcoin Transaction Fees

It is not rare to see people pay 5USD fee for a 1USD bitcoin transaction and then wondering where the money went. During period of bull runs/media frenzy bitcoin network gets congested leading to high fee which create disillusionment among many users. Fortunately it is easy to avoid paying such high fee even in times of high congestion by following few easy heuristics

Choose the correct fee

It is important to check the fee as many wallet will suggest exaggerated fee. Sometimes you may end up paying 50–100% of the payment amount

You should manually set the fee in satoshi/byte. We have set the fee to 2 satoshi/byte. The fee is now 5 cents which is 3.8% of the payment amount which still a bit high but in acceptable range. To know the correct network fee you can consult a few mempool estimators like

• https://bitcoinfees.net/
• https://mempool.space/

Tip: Send your transaction in weekends. Bitcoin network is like city traffic and is relatively less used in weekends. Most of the times you can get away with fee as low as 1 sat/byte on Saturday/Sunday

Optimize Wallet

Another reason your high maybe fee is because the bitcoin wallet you are using isn’t optimized for sending at low fee. You can fix this in two ways:

Use a native segwit wallet

Just by using a native segwit wallet you can save upto 38% on fee.

If your wallet receive address is starting with 1 or 3 prefix, it is not a native segwit wallet. You should switch to a wallet like electrum/ledger/wasabi and make sure you select native segwit/bech32 mode when creating new wallet. Here is a complete list of wallets that support this

Decrease TxOut Fragmentation

As you keep receiving payments, your wallet will have high number of transaction outputs. When you spend money, this will result in high fee. To rectify this, you can do the following

Send complete wallet balance to yourself at 1satoshi/byte during weekends

This will reduce txout number and your subsequent transaction will have a lower fee

To know your wallet type/fragmentation you can use an interesting tool from blockonomics called TxFee Score

You can try Blockonomics TxFee score here

In summary, due to network congestion many bitcoin users are paying high transaction fee. This can be mitigated by choosing the correct wallet and using techniques to optimize wallet structure/fragmentation.