How UTXOs can affect transaction fees

[I_Anime]

One thing I noticed when I started learning about bitcoin transactions was that transactions fees are not simply based on how much bitcoin you’re sending . Several factors  can influence transactions fee you pay  and one of those factors is UTXOs (unspent transactions output).

I will try to simplify this in any way I can . UTXOs is simply a specific chunk of bitcoin that you received from a previous transaction and haven’t spent it , basically we don’t spend bitcoin we spend UTXOs. Now let’s talk how it can affect your transaction fees.

For instance you have 1 BTC in your wallet , but you received it through two separate transactions. Sender one sent 0.4 BTC which is 1 UTXOs and sender two sent 1 UTXOs 0.6 BTC, now you are planning to make a transaction of 0.8 BTC , which will actually cost you both UTXOs Since neither UTXO contains enough BTC to cover the 0.8 BTC by itself.

Now Assuming the fee  is 0.001 BTC

Inputs: 0.4 BTC+0.6 BTC=1 BTC
Output to recipient : 0.8 BTC
Change back to you : 0.199 BTC

Now imagine another folk has 1 BTC  from one single transaction , so we are going to use just 1 UTXOs from the transaction:
1 UTXOs = 1 BTC (which will be enough to cover the whole 0.8 BTC transaction) .

Bitcoin transaction fees are generally based on the size of the transaction, which is measured in vbytes , the fee rate is usually expressed in sats/vbyte (usually in the mempool) . so basically more UTXOs you need to spend  more the inputs and larger the transaction the more Vbytes which will lead to potential higher fee at the same fee rate .

So two folk can have the exact same 1 BTC balance, but potentially pay different transaction fees because their BTC is structured differently into UTXOs.

[EL MOHA]

several factors  can influence transactions fee you pay  and one of those factors is UTXOs (unspent transactions output).

I think this statement can be corrected as the factor depends on the number of UTXO used as input and also the the number of output expected from that transaction.

Everything about bitcoin transaction fee and how it is calculated has long bene discussed numerous time on this forum.
This thread below will help.
Beginner's Guide to Transaction Fees

Bitcoin transaction fees are generally based on the size of the transaction, which is measured in vbytes , the fee rate is usually expressed in sats/vbyte (usually in the mempool) .

Mempool is just a waiting room for transactions before each node picks transaction there and adds it to their candidate blocks, it’s not part of the size of a transaction

[un_rank]

One thing I noticed when I started learning about bitcoin transactions was that transactions fees are not simply based on how much bitcoin you’re sending .

They are not based at all on the amount you're sending. To the network it only views amounts in your wallets as utxos and does not consider the actual value of the coins when deciding the fee.

Mempool is just a waiting room for transactions before each node picks transaction there and adds it to their candidate blocks, it’s not part of the size of a transaction

Nodes have mempools. It is miners who select transactions to add to their candidate block.

- Jay -

[Cookdata]

So two folk can have the exact same 1 BTC balance, but potentially pay different transaction fees because their BTC is structured differently into UTXOs.

Many utxo can affect transaction size and fee but you are more concern on the inputs in a transaction. The more outputs you have, so is your transaction size is going to increase and affect your fee. The scripts also affect your transaction especially segwit, it helps reduce the transaction fee.

Please read about Minimizing bitcoin transaction fee

Mempool is just a waiting room for transactions before each node picks transaction there and adds it to their candidate blocks, it’s not part of the size of a transaction

Nodes have mempools. It is miners who select transactions to add to their candidate block.

- Jay -

Not all miners select transactions, a solo miner can select transactions and add it to their candidate block but usually, they have low probability of finding a block while a miner that mine under a mining pool can't create their candidates block, they have to mine the candidate block from their pool and they have high chance of finding block than solo miners.

I'm not sure about Ocean pool if they have change their pool rules, they allowed miners that mine under their pool to create their candidates block which is why they were able to add transactions that signaled bip110 transactions in their block some months back, but since the fork, I don't know where they belong now.

[Myleschetty]

I appreciate how you explain the factors that affect the price of the Bitcoin transaction fee rate to the point where even a novice can understand it, which is a good job.
However, you neglect to mention network or mempool congestion, which always occurs when there are a lot of unconfirmed transactions at once.

This causes Bitcoiner  to compete by offering high transaction fees in order for their BTC transaction to be added to the block more quickly by miners.

[348Judah]

One thing I noticed when I started learning about bitcoin transactions was that transactions fees are not simply based on how much bitcoin you’re sending .

Bitcoin network has been made perfect for our use in such a way that can be able to know the transaction fee right before making the transaction, you only need to check on how the mample is congested in order to have a clue on what the transaction fee is going to cost us a particular time, this is why the quantity of Bitcoin we are sending does not really matter like how congested the man who is to determine our transaction fee.

[BitMaxz]

One thing I noticed when I started learning about bitcoin transactions was that transactions fees are not simply based on how much bitcoin you’re sending .

Bitcoin network has been made perfect for our use in such a way that can be able to know the transaction fee right before making the transaction, you only need to check on how the mample is congested in order to have a clue on what the transaction fee is going to cost us a particular time, this is why the quantity of Bitcoin we are sending does not really matter like how congested the man who is to determine our transaction fee.

No, everything in a Bitcoin transaction counts toward the transaction fees. It all comes down to the transaction size; the more outputs and inputs it has, the higher the fee.
About the mempool, it only suggests a recommended fee and shows how congested the mempool is.
The quantity does not matter but it still relies on the size of the transaction and the mempool's recommended fee. So expect to get higher fees if the network is congested or if your 1 BTC has a large number of UTXOs.
I'd suggest consolidating them on non-busy days or if the mempool recommends 1 sat/vbyte. At the very least, it can help you reduce the size of your Bitcoin by merging all UTXOs into a single output. As a result, if the mempool becomes congested again in the future, you will save more fees because the size is smaller than your previous Bitcoin, which have many UTXOs.

We have some guides here about consolidating; you might be interested. Check them here: Consolidate your inputs

[Catenaccio]

No, everything in a Bitcoin transaction counts toward the transaction fees. It all comes down to the transaction size; the more outputs and inputs it has, the higher the fee.
About the mempool, it only suggests a recommended fee and shows how congested the mempool is.

Some websites that are mempool observers to use and check mempools.

https://jochen-hoenicke.de/queue/#BTC%20(default%20mempool),24h,weight
https://mempool.jhoenicke.de/#BTC,24h,weight
https://mempool.space/
https://whatthefee.io/
https://bitcoiner.live/

[Darker45]

Not only are Bitcoin transaction fees "not simply based on how much bitcoin you’re sending", the how much have actually zero effect on the fees.

Transaction size isn't transaction amount. It's data size. It's the number of UTXOs. It's, therefore, possible that a 0.0001BTC transaction could be way bigger than a 1,000BTC transaction. In which case, the former would be much more costly than the latter. Think of $1,000,000 taking up much smaller space if it's in check than $100 if it's in coins.

Other than the transaction size, another factor that would affect your fees is the address format. We all know that sending funds using a Bech32 address is cheaper than using a legacy address, for example.

And, finally, network congestion is also a big factor. When the network is busy, the fees could shoot up to unimaginable levels.

[hosemary]

Other than the transaction size, another factor that would affect your fees is the address format.

When you say that the fee depends on the transaction size, you are already taking the address format into account. Different address formats can result in different transaction sizes, and therefore saying that the address format is another factor affecting the transaction fee is misleading.