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I was making a multisig account in coinb.in. Then I tried to make a transaction (spend funds). At the bottom there was a box for writing the fee.

What fee? I thought bitcoin sending was free! Beside the box, it said, "Make sure you include an adequate fee, otherwise your transaction may be rejected. 0.0005 BTC or more is recommended."

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3 Answers 3

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The fee is optional; however, including your transaction in the next found Bitcoin block is also optional.

The miner who finds a block gets to decide which, if any, transactions are recorded with the block they found.

Factors that influence whether your transaction is included in that found block include:

  1. The block size limit. Sometimes the transactions are too large to all fit into the block, so most will prioritize higher fee transactions to be included first.
  2. Local settings for the person finding the block can be set to ignore transactions with fees lower than an amount of their choosing.
  3. Some people will include all the transactions they have seen, as long as they will all fit, but this is not the normal default mode of operating for miners. If you do not include any fee, then this would be your only chance.
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  • But how do I calculate the priority? In the bitcoin wiki I didn't understand what input_value_in_base_units is.
    – Tor
    Oct 30, 2014 at 17:49
  • The input size is the bitcoin value of your source wallet. DeathAndTaxes explains it more here: bitcointalk.org/index.php?topic=95312.msg1053439#msg1053439
    – aboron
    Oct 30, 2014 at 17:53
  • Does input_value_in_base_units means total amount of bitcoin?
    – Tor
    Oct 30, 2014 at 17:55
  • In any given wallet you will have fragments from many transactions, each one is a separate input source. Assuming you have a new empty wallet and send it 10 bitcoins, then 10 bitcoins will be the size of your input source for your next outgoing transaction (regardless of how much of that 10 bitcoins you are giving someone). The transaction will essentially send all 10 bitcoins in a split - part to the person you sent, and the remainder back to yourself.
    – aboron
    Oct 30, 2014 at 17:59
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Yes, but it's up to the miners if and when they'll include your transaction. Miners get the fee you pay when they put your transaction in a block. Tip your miner, and he will include you faster.

Miners often include no-fee transactions, but if the blocks are full (they have a size limit) they might not be included at all! These transmission fees are a thorn in the collective eye, but in Bitcoin they are essential to security.

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You can check this link that explains everything clearly. So, I will summerize the content.

First of all, to spend d bitcoins, you need to have d bitcoins in your wallet. So, you refer to all transactions (Say T1, T2, ..., Tk) as inputs to your new spend transaction, from which you received at-least d bitcoins collectively. As you may know already, to get the priority of a transaction you need to multiply the age of Ti with its BTC value, sum over all i from 1 to k, and then divide this sum by your spend transaction size. Now, you need not calculate the exact size of the transaction, as you can use an approximation on the upper size limit (USL) = function(#i/p, #o/p).

if((USL < 1000 bytes) and (priority >= 0.576)) then no txn fee is required
else you need to pay at-least 0.0001 BTC per 1000 bytes of your spend txn.

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