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Author Topic: Small doubt about fees  (Read 147 times)
Csmiami (OP)
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May 13, 2020, 10:18:14 PM
Merited by hugeblack (3)
 #1

Last week, I translated LoyceV's "consolidate your inputs" guide into Spanish, so that local users could also read it, and do the thing local boards are meant to do. As it is natural, some questions arose, and even if all of them were answered; one of them has gotten me thinking ever since.

A higher fees means that your transaction will be picked faster from the mempool than a lower fee transaction. But what happens when a transaction is big enough to pay more in fees than a smaller transaction with a higher fee? I'll add an example:

User A sends a 70 byte transaction at 60 satoshi/byte fee. It's a high fee, and that user is confident is going to be part of the next block. Total fee paid (size*fee); 4200 satoshi
User B sends a 200 byte transaction at 25 satoshi/byte fee. It's still a "high fee" IMO, but the user has no rush on getting that transaction sent, and believes the transaction will be confirmed within 4 hours tops. Total paid fee, 5000 satoshi

Fee from user A is higher than in B, but the net worth of the fee in B is higher than in A.

It is my understanding that because of that net worth, transaction B will be confirmed earlier than transaction A (5000>4200), but I'd like to double check it before I give an incorrect reply back in the local board.

Apreciate your replies on this, and thanks in advance for answering

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May 13, 2020, 10:21:08 PM
Merited by LoyceV (4), Rath_ (2), hugeblack (1), Csmiami (1)
 #2

The transaction selection varies across the different miners as they have different rationale for choosing transaction.

Most commonly, miners would try to maximize the space in each of the block by choosing the transactions with the highest fee per byte. Transaction A should confirm first as the fee per byte is higher than B. Its quite pointless to choose B since you can fit more transactions with lower overall fees but still obtain a higher total fee in the block if you choose the transactions with the highest fee density.

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Csmiami (OP)
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May 13, 2020, 10:35:51 PM
 #3

Okay, that does actually make a lot of sense. I hadn't even considered block size; but if you can have almost 3 smaller transactions with a higher fee, instead of a bigger one with smaller fee; you'll earn 3 times more...

Thanks for solving that doubt! I'll leave the thread open in case someone wants to point out something more

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May 14, 2020, 12:37:47 AM
 #4

Yes, this is why you need to think in terms of fee rate... not total fee amount... I'll use a somewhat extreme example to illustrate:

TransactionA: 50,000 byte transaction that pays 1 sat/byte = 50,000 sats to the miner in fees
TransactionB: 226 byte transaction that pays 100 sat/byte = 22,600 sats to the miner in fees

Now, you might think, well obviously take the 50,000 sats! But theoretically, you could fit another 220 of the smaller transactions in the same "space" in your block... and then you would get: 221 * 22600 = 4,994,600 sats!!?!

So, when you have a lot of transactions to choose from, it is (generally) the fee rate that makes the difference as to whether or not a transaction will be prioritised.

Obviously, if you don't have many transactions to choose from, the fee rate becomes less of an issue, which is why when there are not a lot of unconfirmed transactions and they can all fit, the miners will just include everything to get as much fee value as they can! Tongue

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