Transaction fees are required for miners to process a transaction on the bitcoin network.
To send any transaction on the bitcoin network, you must include a transaction fee, which is collected by bitcoin miners for processing your transaction.
Transaction fees are required when spending from any self-custody bitcoin wallet. Unchained does not collect any part of the transaction fee.
What affects the size of the transaction fee?
When you make a withdrawal from your Unchained vault, the size of your transaction fee will depend on two variables:
1. Bitcoin network traffic at the time of your transaction
2. Data size of your transaction
Note: Transaction fees can vary a lot depending on things like time of day and bitcoin market conditions. For example, during times of high bitcoin price volatility, fees are usually higher.
Bitcoin network traffic
Bitcoin miners prioritize processing transactions (adding them to the blockchain) based on which transactions include the highest fees. The more people trying to send bitcoin payments at any one time, the higher the fees you will have to pay to get your transaction processed quickly.
Note: When we say "processed," we mean the transaction has received one confirmation (included in one block).
If you select a fee much lower than what other bitcoin users are paying at the time, you could be waiting a long time for your transaction to be processed—sometimes even days.
To make things easy for you, at Unchained we estimate the required fees when you make a withdrawal. You have two options:
- High priority: estimated to be processed within half an hour.
- Low priority: estimated to be processed within a few hours.
Caution: Both high and low priority time estimates are only estimates and your withdrawal could sometimes take much longer.
Unchained's fee estimation is provided by mempool.space.
When your transaction is processed, bitcoin miners commit your data to the blockchain. The more data required to process your transaction, the higher the fees the miners will require. Certain variables can affect the data size of your transaction, including:
- Number of deposits (UTXOs) included: If you make many small deposits to your vault, each deposit is recorded separately on the blockchain. When you make a withdrawal, these deposits are bundled up into one output, which requires multiples more data than when spending from one large deposit.
- Singlesig/multisig: The trade-off for the added security you achieve with bitcoin multisig is that multisig transactions typically cost more than regular singlesig transactions.
Tip: To keep your transaction fees down, try to batch deposits to your vault. And definitely don't dollar-cost-average directly to your vault.
For a more in-depth understanding of how bitcoin transaction fees work, see our blog article from engineer Buck Perley.