This was first published on 30th December 2017
Anyone who regularly uses Bitcoin will have noticed the Bitcoin transaction fees have recently exploded. Every transaction on the Bitcoin network includes a fee, paid to reward the Bitcoin miner that processes the transaction. With Bitcoin’s recent explosion in popularity, the fee to process at Bitcoin transaction within a reasonable time can be £10-£30. Many Bitcoin wallets will allow you to set a lower fee, should you wish, but this often leads to a transaction becoming ‘stranded‘ for weeks before it is confirmed.
Bitcoin transaction fees on Bitbargain, 30th December 2017
My preferred Bitcoin supplier has been UK based Bitbargain for many years. However, as you can see above, at present the Bitcoin transaction fee can be over £15. This fluctuates throughout the day based on demand, and in recent weeks the lowest available fee has often been over £20. For smaller transactions, this can mean the fee paid exceeds the value of the transaction.
Not too long ago, this fee would have been a matter of pence. Paying an additional fee of £2-£3 would result in an expedited transaction and confirmations within minutes. Unfortunately at present, this is not the case, and my advice would be to use alternative coins such as Litecoin or Bitcoin Cash in lieu of Bitcoin where possible. These altcoins offer much faster confirmations with negligible fees of a few pence.
Fortunately, the workaround below will allow you to purchase Bitcoin and pay no fees whilst making a withdrawal to a BTC wallet. This isn’t restricted to the UK, and whilst the example uses GBP £ to make a purchase, the same method will work when buying Bitcoin with USD, LTC, ETH, and many other currencies.
Buying BTC with a debit card on Coinbase, showing debit card fee
If you do not yet have a Coinbase account, register one now. From here, you can purchase Bitcoin with your debit or credit card. Whilst this does incur a small fee, usually £1.49 or £1.99, this is the only fee you will have to pay. Alternative payment methods may allow you to avoid even this fee, but these may be less convenient.
Normally, Coinbase would charge you a large fee to withdraw this Bitcoin to another wallet. However, this workaround will allow you to withdraw the entire BTC amount purchased from your Coinbase wallet to any BTC address without any deductions or fees.
Transferring BTC from Coinbase to GDAX account
Go to GDAX, and login with your Coinbase account details. GDAX is a cryptocurrency trading platform owned and operated by Coinbase. The trade interface can look pretty daunting, but don’t worry, we don’t need to use it.
Once logged in GDAX, go to the ‘Deposit’ screen for BTC. You’ll find this on the GBP/BTC trading page, near the top left. This may be USD/BTC etc. depending on your country. Select the ‘Coinbase account’ tab at the top. Transfer the entire balance of Bitcoin you purchased from your Coinbase account into GDAX. This is free and instant.
Close the BTC deposit box, and move on to the next step.
Withdrawing BTC from GDAX account to BTC address without Bitcoin transaction fees
GDAX provides free withdrawals of BTC to any Bitcoin wallet, as they bundle the transactions together and cover the fee themselves. This is how we will avoid Bitcoin transaction fees on our purchased coin.
Simply open the BTC withdrawal screen, where there will be a tab for ‘BTC wallet’ withdrawals. From this tab, simply enter the BTC address you wish to send your purchased Bitcoin to, and enter the amount. Presumably you will be sending all the coin to a single wallet, so hit the ‘MAX’ option above the amount input box.
Your coin will then be sent to the given BTC address on the next payment run. The withdrawal may take some time to be processed by GDAX, so whilst this is normally within 30 minutes, it can sometimes take a few hours. Once processed, the transaction should be confirmed by the Bitcoin network within an hour or so.
Whilst this is a slower, more convoluted process than we are used to, it allows you to avoid extremely high Bitcoin transaction fees whilst still getting your Bitcoin confirmed within a few hours. Without using this method, not paying transaction fees could mean waiting many weeks for a transaction to be confirmed.
This step is only required if you want to obtain the BTC withdrawal transaction hash, allowing you to view the transaction on the blockchain as it becomes confirmed.
Simply go to the ‘Accounts’ tab of your profile, on the top right of the GDAX page, then hit ‘Transfers’, again in the top right. Click on your withdrawal to see the details. This will initially just be an internal transaction reference and an estimated payout time. Once GDAX has issued your withdrawal, a BTC transaction hash will also be displayed here. You can use this to monitor the status of your transaction on websites such as Blockchain.info.