Fee Estimation

Fee estimation is the process by which a wallet predicts the feerate a transaction needs to confirm within a desired number of blocks. Bitcoin Core exposes this through the estimatesmartfee RPC, which returns an approximate fee per kilobyte for a given confirmation target between 1 and 1008 blocks. Getting the feerate right matters: pay too little and a transaction can languish unconfirmed; pay too much and you overspend on a permanent, irreversible payment.

How Bitcoin Core Estimates

The built-in estimator, CBlockPolicyEstimator, is history-based rather than mempool-snapshot-based. It sorts observed transactions into exponentially spaced feerate buckets (from 1,000 to 10,000,000 sat/kvB, spaced by a factor of 1.05) and tracks, for each bucket, how many blocks transactions at that feerate took to confirm. From this rolling record it derives the lowest feerate that historically achieved confirmation within the target. A CONSERVATIVE mode biases toward higher, more reliable estimates; ECONOMICAL reacts faster to falling fees.

Limitations and Alternatives

Because it leans on past confirmations, the estimator can lag sudden mempool surges or collapses. Many wallets therefore supplement it with live mempool inspection, reading the current backlog directly to pick a feerate. Sovereign operators running their own node gain the most accurate, trustless view by querying their own mempool rather than a third-party fee API.

Fee estimation depends on the data flowing through Mempool Policy. When an initial estimate proves too low, users turn to fee-bumping via child transactions — see Anchor Outputs and Transaction Pinning Attacks.