BCASH - How Fee Estimate Works

Bitcoin Cash (BCH) operates on a UTXO (Unspent Transaction Output) model, where the transaction fee is estimated based on two primary parameters:

1. Approximate fee per kilobyte
2. Transaction size

BCH Fee Estimate Formula

The Formula

Estimated Fee == "approximate fee per kilobyte" x "transaction size"

Step_1: Calculating the approximate fee per kilobyte

To estimate the fee for a BCH transaction, you can use the RPC method estimatefee:

• RPC REST API docs

Example request:

curl --location 'https://api.tatum.io/v3/blockchain/node/BCH' \
--header 'Content-Type: application/json' \
--header 'x-api-key: {YOUR_API_KEY}' \
--data '{
    "jsonrpc": "1.0",
    "id":"1",
    "method": "estimatefee",
    "params": []
}'
//response:
{
    "result": 0.00001,  // Estimated fee-per-kilobyte
    "error": null,
    "id": "1"
}

Step_2: Calculating the Transaction Size

Transaction Size (in bytes) = (Number of Inputs x 148) + (Number of Outputs x 34) + 10

• Number of Inputs: The number of transaction inputs (unspent transaction outputs or UTXOs) that your transaction is spending.
• Number of Outputs: The number of transaction outputs, including the recipient's address and any change addresses.
• 10 bytes: A fixed overhead for the transaction header.

Let's break it down:

• Number of Inputs x 148 bytes: Each input typically takes 148 bytes. This includes the previous transaction's reference (36 bytes) plus a scriptSig (typically 110 bytes) for unlocking the UTXO and some additional bytes for metadata.
• Number of Outputs x 34 bytes: Each output typically takes 34 bytes. This includes 8 bytes for the amount in satoshis, 1 byte for the OP_RETURN code (if used), and 25 bytes for the recipient's public key or address.

Example BCH transaction

Parameters

• Number of Inputs = 2
• Number of Outputs = 2

Using the formula:

1. Transaction Size (in bytes) = (2 x 148) + (2 x 34) + 10
2. Transaction Size (in bytes) = 296 + 68 + 10
3. Transaction Size (in bytes) = 374 bytes

So, the transaction size in this example is 374 bytes.

Calculating the Estimated Fee

Using the estimated fee-per-kilobyte from the RPC call method "estimatefee", where its response was 0.00001 BCH per kilobyte:

1. Transaction size in kilobytes: 374 bytes ÷ 1000 = 0.374 kilobytes
2. Approximate fee per kilobyte: 0.00001 BCH

Estimated Fee = 0.00001 BCH/kilobyte × 0.374 kilobytes

Estimated Fee = 0.00000374 BCH

Therefore, the estimated fee for this transaction would be 0.00000374 BCH