The BitPay Wallet uses Bitcore to determine transaction fees. Bitcore utilizes Bitcoin's official estimatesmartfee algorithm. This algorithm takes into account the current state of the Bitcoin network and the transaction confirmation speed the user selects.
The estimatesmartfee function calculates transaction fees (sat/vB) by analyzing recent blockchain history to predict the fee rate required to confirm within a specified block target. It maintains a high probability of success (typically 95%).
Key Features:
- Modes: Conservative (default, higher fees for rapid confirmation) and Economical (lower fees, adapts faster to market changes).
- Methodology: Analyzes fee rates and confirmation times of recently confirmed transactions to determine the minimum fee rate for a 95% probability of inclusion within the target blocks.
- Data: Tracks the mempool and recent block fee rates, prioritizing the latest data.
- Inputs: Requires conf_target (blocks) and optional estimate_mode.
- Output: Returns the estimated fee rate per kilobyte and its validity period in blocks. A negative value indicates insufficient data.
The algorithm provides robust, dependable fee recommendations despite fluctuating network congestion and is resilient to "out-of-band" payments.
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