BTC - Fee Estimate

Bitcoin (BTC) is a UTXO-based chain, where the Fee estimate for a transaction fee comes from two main parameters:

• Approximate fee per kilobyte
• Transaction size

BTC Fee Estimate Formula

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

Calculating the approximate fee per kilobyte

To estimate the fee for a BTC transaction, you can use the Tatum endpoint for BTC "fee estimate"

curl --location 'https://api.tatum.io/v3/blockchain/fee/BTC' \
--header 'x-api-key: {API_KEY}' \
--data ''
//response:
{
    "fast": 13.5, // Satoshis per byte == 0.0135 satoshis per kilobyte.
    "medium": 5,
    "slow": 4,
    "block": 813488, //last used to calculate fee from
    "time": "2023-10-23T12:14:42.817Z" // last time when calculation was executed
}

📘

More information at the following link.

There's also the option to make a cURL RPC node request:

curl --location 'https://api.tatum.io/v3/blockchain/node/BTC/' \
--header 'Content-Type: application/json' \
--header 'x-api-key: {API_KEY}' \
--data '{
    "jsonrpc":"1.0",
    "id":"curltext",
    "method":"estimatesmartfee",
    "params":[2] // specifies the target confirmation time in blocks.
//response:
{
    "result": {
        "feerate": 0.00001, // Satoshis per Kilobyte
        "blocks": 2
    },
    "error": null,
    "id": "curltext"
}

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 BTC transaction

• 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.