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For past ~36 hours, the fees returned from bitcoind are very high compared to the fees returned by other estimators, for instance the mempool.space explorer. It is also much higher than the feerate of most of the transactions in the recent blocks.

Since the Bitcoin Core fee estimator is based on historical transaction feerates, why is it giving such a high estimate?

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The Bitcoin Core fee estimator does not aim to provide the minimum possible feerate to be included within N blocks. It aims to provide the minimum feerate such as one has a high degree of confidence the transactions will be mined within N blocks.

It therefore tends to often give a higher estimate than appears to have been necessary on any particular transaction. But it also provides a guarantee [0] that over time a high percentage of the transactions created with the recommended feerate will have been mined within the required N blocks.

Bitcoin enthusiats often use mempool-based estimates to try to minimize the fees and tend to view this guarantee as unnecessary. This is because they understand how Bitcoin works and can cope with a transaction sometimes taking longer than necessary to confirm (or use techniques such as RBF). They tend to overlook it is an important property for people who don't want to be Bitcoin experts and just want their money to work reliably.

That said:

  1. An economical mode can be used with estimatesmartfee instead of the default conservative mode. By trading off some reliability, this mode is more responsive to short term drops in the prevailing fee market.
  2. A discussion was recently started on the Bitcoin Core Github repository about how the accuracy of the fee estimator can be improved.

[0]: it's still an estimation. It only guarantees as much as an estimation can.

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