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Mempool Based Fee Estimation on Bitcoin Core

Mempool Based Fee Estimation on Bitcoin Core

Original Postby ismaelsadeeq

Posted on: April 2, 2024 14:34 UTC

In analyzing the performance of fee rate estimates, it has been observed that discrepancies primarily occur when the time difference between the estimation and the actual block discovery exceeds 10 minutes.

This variance is often attributed to periods of network congestion. During such times, while the estimates might occasionally overpredict within an acceptable range, opting for a lower fee rate significantly increases the risk of the transaction being deprioritized or excluded from the block.

An in-depth review of the fee rate for block 832478 revealed that the 50th percentile estimate of 150 sat/vB aligned perfectly with the confirmed block's statistics, validating the accuracy of this prediction method. The analysis further detailed the distribution of fee rates within the block, highlighting the highest (75th percentile) and lowest (5th percentile) fee rates as 178 sat/vB and 60 sat/vB, respectively, with an average around 170 sat/vB. Considering a shift to estimating at the 25th percentile (130 sat/vB) was discussed; however, concerns were raised about the increased likelihood of transactions being bumped due to delays in block confirmation and subsequent higher-value transactions entering the mempool.

The discussion extended into the evaluation of overestimation instances, particularly emphasizing that paying above the higher threshold does not equate to better chances of inclusion but rather results in unnecessary expenditure. Adjustments have been made to the graph plotting mechanisms to accommodate both linear and logarithmic scales on the y-axis, enhancing the visualization of data. The provided images illustrate the graphical representation of fee rate estimates across specified blocks, showcasing the differences in visual interpretation when employing a log scale, with and without a defined threshold.