Here is a quick summary of the method used to compute estimates. The algorithm uses a simplified model taking into account 3 factors:
Unlike some other fee estimation algorithms, it doesn't look at the previous mined blocks at all. Instead, it looks at the factors that are going to drive the production of the next blocks: the mempool, the speed of increase of the mempool and the probability at which it is being drained.
Its goal is to give reasonable estimates given the presently known mempool dynamics, while avoiding overestimation.
The mempool is categorized into "fee buckets". A bucket represents data about all transactions with a fee greater than or equal to some amount (in sat/vbyte).
Each bucket contains 2 numeric values:
current_weight
, in WU (Weight-Units), represents the transactions currently sitting in the mempool.flow
, in WU/min (Weight-Units per minute), represents the speed at which new transactions are entering the mempool. Currently that is sampled by observing the flow of transactions during twice the timespan of each target interval (ex: last 60 minutes of transactions for the 30 minutes target interval)For simplicity, transactions are not looked at individually. Focus is on the weight, like a fluid flowing from bucket to bucket.
For each target interval (30 mins, 1 hour, 2 hours etc...), we're trying to find the cheapest fee rate that is likely to become fully cleared (0 WU) with a given probability.
The probability is defined by the "confidence" setting on the website. Current values are:
Now let's simulate what's going to happen during each timespan lasting minutes
:
added_weight = flow * minutes
1 - scipy.stats.poisson(λ).cdf(k)
), with λ = minutes / 10
(expected average number of blocks), then iteratively increase the k
parameter (number of blocks) until the output probability is < to our chosen probability and then we return the previous k
value.removed_weight = 4000000 * blocks
final_weight = current_weight + added_weight - removed_weight
The cheapest bucket whose final_weight
is ≤ 0 is going to be the one selected as the estimate.
Because the window used to sample the flow of transactions increases proportionally to each target interval, it sometimes gives incoherent results with estimates that decrease then increase as the window gets larger (if there was significant variations in the flow of transactions during this time).
Since this makes no sense (if a low fee gets you confirmed faster, then there is no need to increase the fee to target a longer window), so for each estimate we take the minimum value of all estimates at windows shorter or equal.
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