The LocalBitcoins Blog

Tales from the world of Bitcoin & Cryptocurrency

New Bitcoin transaction fee system

by Jeremias

Introducing deposit fees for LocalBitcoins

Due to the rising Bitcoin network fees we feel there is a need to revisit the LocalBitcoins transaction fee system. In order divide the costs of handling Bitcoin transactions in a fair manner we are introducing deposit fees for incoming transactions. At the same we will lower Bitcoin sending fees for all customers. The new fee system will be put in to effect around 19th-21st June.

With our old transaction fee system you pay a transaction fee when you send Bitcoins out from LocalBitcoins to a different Bitcoin wallet. This fee covers the cost for us to send your transaction and the costs for us to manage the deposit(s) that we used to send your transaction.

In the Bitcoin network managing deposits uses up a lot of blockchain space while handling a withdrawal uses up much less space. This means that a large part of the old Bitcoin transaction fee was for covering costs related to deposits. This means that customers who make many small deposits to their LocalBitcoins wallet causes the sending transaction fees to rise, and these costs were paid by customers who were sending Bitcoins.

We want to spread these costs more fairly between our customers. By introducing deposit fees customers who make many small deposits will pay a larger share of the overall transaction costs and customers who send out transactions will enjoy lower fees.

All fees will be adjusted dynamically based on how congested the bitcoin network is.

Outgoing transfer fees will be smaller

With the new transaction fee system outgoing transfer fees will be smaller than with the old Bitcoin transaction fee system. You can save further on the sending fee by timing your transaction to when the network is quiet.

Size of deposit fees

Deposit fees will be dynamically adjusted based on how congested the bitcoin network is. Deposit fees will be larger than the new sending fees, generally we expect it to be about 3x the amount of sending fees. Based on current transaction data withdrawal fees would be somewhere close to 0.00022 BTC per transaction and deposit fees around 0.00066 BTC per transaction. The fees should get smaller in the long run, as it makes less sense to make small deposits, which increase the fees for all users.

What about the bitcoin network fees in the future?

Bitcoin network fees have been rising along with the Bitcoin price. At LocalBitcoins we try to develop tools that make our fees competitive while ensuring fairness in our transaction fee system.

LocalBitcoins is committed to improving the situation. We'll invest resources towards developing various offchain technologies, transaction batching and other tools to make using Bitcoin cheaper for our customers.

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