Q. What is this "Network Cost", and what is it for?
When you pay a BitPay invoice, your payment goes to a BitPay address. We pay network-based miner fees (just like you pay to send BTC or BCH) to move invoice payments so we can combine them for processing in something called a "UTXO sweep" (Unspent Transaction Output sweep). The Network Cost is a fee charged to purchasers which helps cover BitPay's miner fee cost.
Miner fees are variable costs for BitPay based on network conditions. This means the Network Cost fee also changes to reflect network conditions. Read our original post about why we introduced the Network Cost in February 2017.
Q. Didn't I already pay my miner fee?
Yes, you need to include a miner fee with any outgoing payment. However, there is a difference between the Network Cost fee and your miner fee. The BTC or BCH miner fee is usually included with your payment automatically, and it goes directly to the BTC or BCH miners.
The Network Cost fee goes to BitPay to cover BitPay’s miner fee cost for the UTXO sweep of your payment. It is not the same as your miner fee for the miners, but it is based on recommended miner fee levels.
Q. What other purchaser fees does BitPay have?
The Network Cost fee is the only fee BitPay charges to people who pay BitPay invoices.
BitPay charges a 1% processing fee to BitPay merchants. Merchants may choose to pass this fee on to the buyer.
Q. What is BitPay paying miner fees for? What is a UTXO sweep?
When you make a Bitcoin or Bitcoin Cash transaction, you are sending funds to a wallet address controlled by another person (or in our case, BitPay). An Unspent Transaction Output (UTXO) is what the payment recipient receives and then transfers away from the receiving address. This is the unit of Bitcoin or Bitcoin Cash which can actually be used in another transaction.
The miner fees BitPay pays to combine and sweep UTXOs from invoice receiving addresses are a major part of BitPay's costs of processing payments on the blockchains BitPay supports. This cost is not unique to using BitPay – any business or person accepting on-chain Bitcoin or Bitcoin Cash payments will incur the expense of consolidating UTXOs from each payment they receive.
This chart illustrates how your payment moves through BitPay and to the merchant you are paying.
Q. How does BitPay calculate the Network Cost?
Miner fees are variable depending on network conditions and on how fast you want your transaction to be confirmed. Since the Network Cost fee exists to allow BitPay to pay variable miner fees, the Network Cost uses recommended miner fee levels of the blockchains we support:
- Bitcoin (BTC): We use the local currency value of the BTC fee suggested by the Bitcoin Core "Conservative" 2-block fee estimate. This is the fee level which Bitcoin Core recommends at any given time for increasing the likelihood that a Bitcoin transaction will confirm within 2 blocks.
- Bitcoin Cash (BCH): We use the local currency value of the BCH fee suggested by the Bitcoin ABC 2-block fee estimate. This is the fee level which Bitcoin ABC recommends at any given time for increasing the likelihood that a Bitcoin Cash transaction will confirm within 2 blocks. (The "Conservative" fee estimate mode does not exist in Bitcoin ABC.)
Because we use fee recommendations based on the fee sizes actually at work on the BCH or BTC networks, the Network Cost fee amount can fluctuate. It is tied to network conditions of the Bitcoin or Bitcoin Cash networks at that time. For example, if these networks are congested and miner fees rise, the Network Cost also increases.
2-block speed allows us to ensure that we can process funds reliably and quickly in all network conditions. Using a lower-than-average miner fee can put a transaction at risk of slow confirmation or no confirmation at all. Fast, reliable transaction processing internally allows us to provide our service to businesses which expect uptime and consistent payment processing from BitPay.
Q. Where can I see the Network Cost on BitPay invoices?
We show the Network Cost in two places on BitPay invoices: the currency selection screen and the itemized invoice total on the payment screen.
Our invoices show the Network Cost in terms of the payment currency as well as your invoice currency.
Q. Why would a Network Cost amount show as $0.00?
If a Network Cost amount is calculated to be lower than $0.01 and less than 0.05% of the invoice price, BitPay does not charge the Network Cost.
Q. What if the Network Cost is too high?
If the Network Cost is $1, a $5 payment may be uneconomical for most people. In cases like these, you can let the BitPay invoice expire without payment. From here, you have a couple of options if you still want to use a cryptocurrency to check out with a BitPay merchant.
One option is to use another supported cryptocurrency with lower miner fees (and therefore lower Network Cost). Otherwise, if you want to use your original currency choice, you can batch your purchases and make a larger payment. A $1 Network Cost for a $100 payment might be worth it for you if you want to use a particular currency.