Maximizing Client Network Savings

Setting the Standard for Bitcoin Transaction Fees

BitGo’s new generation wallet continues to lead the industry in transaction fee savings by being the first to take advantage of new features in the Bitcoin protocol such as taproot, musig2, and more, including:

• Transition to Native SegWit: By switching the default receive address type from wrapped SegWit (P2SH-P2WSH) to native SegWit (P2WSH) addresses, BitGo slashed transaction input sizes by 25%, resulting in lower fees and faster processing times. This move saves clients $8.3 million annually at a Bitcoin price of $60,000. By adopting Taproot, potential savings can soar to $11.8 million per year (See Financial Benefits of Using Segwit for New Addresses).
• Support for Musig2 Taproot: BitGo’s support for Musig2 Taproot enables cost-efficient multi-signature transactions with enhanced privacy over regular multi-sig. This innovation results in smaller, more efficient transaction sizes, reducing fees and improving scalability.

BitGo has always been at the forefront of fee computation and reduction, consistently advancing technology to minimize transaction fees for clients while pioneering innovations within the digital asset space. As the first to implement Taproot upon its launch, BitGo leads the industry with cutting-edge features that maximize efficiency and cost savings, proving that not all Bitcoin transactions are equal.

As the premier wallet company, our mission is to deliver trust while driving the global economy forward. From small startups to Fortune 500 companies, our clients demand industry-leading performance and security to safeguard their funds. We understand that every marginal gain is crucial, providing innovative solutions to address today’s challenges and enable future growth. BitGo’s commitment to cutting-edge technology and robust security ensures our clients navigate the complexities of the digital landscape with confidence, achieving unparalleled efficiency and cost-effectiveness in their transactions.

Recently, BitGo transitioned from default wrapped SegWit (P2SH-P2WSH) addresses to native SegWit (P2WSH) addresses, reducing transaction data size by 25%, leading to lower transaction fees and faster processing times. This shift enhances transaction efficiency with improved wallet compatibility and aligns with broader industry trends. Furthermore, BitGo supports Musig2 Taproot, a cost-efficient multi-signature scheme that maintains the security benefits of multi-signature transactions with added privacy.

Financial Benefits of Using Segwit for New Addresses

Switching to SegWit for new addresses instead of legacy formats delivers substantial savings on network fees, ensuring more efficient and cost-effective transactions. Our adoption of Native SegWit as the default drastically reduces daily and annual fees, thanks to an optimized transaction structure. Key benefits include:

• Daily Savings: With a transaction rate of approximately 0.5 inputs per second, BitGo processes around 43,200 inputs per day, saving approximately 0.38 BTC in network fees daily at average fee rates. During fee spikes, these savings become even more significant, mitigating increased costs.
• Annual Savings: This daily saving aggregate to a remarkable annual saving of $8.3 million in network fees, based on a Bitcoin price of $60,000.
• Additional Potential Savings: By adopting Taproot, customers could further enhance their savings, potentially reducing fees by an additional $11.8 million per year (with the same assumptions defined under daily savings).

Not only are clients better off with lower fees, but our platform helps them manage unconfirmed transactions on chain with our Replace-By-Fee implementation.

Bitcoin Address Types

Bitcoin transaction fees are a critical factor influenced significantly by the type of address used. Understanding the differences between various Bitcoin address types can help clients optimize their transaction costs. Below, we’ve provided a comprehensive comparison of different address types and their associated costs, highlighting how choosing the right address can lead to substantial savings.

Address Types and Costs

Each Bitcoin address type incurs a specific fee when spending from it, with these fees varying based on the address format. The estimates provided here are based on a fee rate of ~20 Satoshi per vByte and a Bitcoin price of $60,000, reflecting the market conditions in April 2024. By analyzing these costs, clients can make informed decisions to minimize their transaction fees and enhance their overall Bitcoin experience.

Choosing the right receive address type for Bitcoin transactions is crucial for managing fees effectively. When you receive Bitcoin deposits, the address type you select can significantly impact the fee incurred when spending these deposits. The table below summarizes various receive address types across several platforms, providing insights into their compatibility and cost implications, ensuring you make informed decisions to optimize transaction efficiency.

Address Type Efficiency and Cost Comparison

Recent advancements have made multisig transactions more cost-effective. In particular, BitGo’s MuSig2 implementation, which uses P2TR (Taproot) addresses, has an input size of only 58 vBytes, making it more efficient than the traditional single-sig addresses used by Coinbase and Fireblocks.

Therefore, when comparing the input sizes and associated costs, BitGo’s Musig2 not only provides the security benefits of multisig but also does it at a lower cost than many single-sig address types. Additionally, with the enhanced privacy benefits of Taproot, our clients receive top-tier security and privacy without incurring higher fees.

Receive Address Type

These addresses are generated and shared with others to receive Bitcoin deposits. The address type selected can significantly affect the one-time fee paid when spending these deposits. Note that all wallets can send to any address type, and if a recipient’s wallet cannot understand a particular type, a new, compatible address can also be generated.

Address Type Default Setting

To ensure maximum compatibility, we currently default to the P2WSH address type.

Fee Optimized Setting

For clients looking to minimize fees, P2TR MuSig2 addresses are the most cost efficient. To generate a P2TR MuSig2 address, pass chain: 40 in the generateAddress call. If older wallets do not support this address type, you can ask the sender to update their wallet software or generate a default address type for compatibility.

Change Address Type

Change addresses, used internally by BitGo, have the same options as receiving addresses.

Change Address Default Setting

BitGo defaults to P2WSH for change addresses to maintain maximum compatibility.

Recommended Setting

If you use your wallet exclusively through the browser, go to “Update Change Address Type” in the wallet settings tab and select “Taproot Keypath (P2TR-MUSIG2).” For SDK users who use modern SDKs and browsers exclusively, set changeAddressType: “p2trMusig2” in your build parameters to optimize for the lowest fees while maintaining multi-sig security.

For information about using older versions of the SDK and the need to update to a modern version, please refer to the documentation in our developer portal.

About BitGo

BitGo, founded in 2013, is a leading provider of secure digital asset wallet solutions, offering institutional-grade custody, staking, trading, and core wallet infrastructure. Notably, it pioneered the multi-signature wallet and launched BitGo Trust Company in 2018, the first qualified custodian for digital assets. With a $250 million insurance policy, SOC 1 Type 2 and SOC 2 Type 2 certifications, and rigorous regulatory compliance, BitGo ensures high standards of security and confidentiality. Expanding its services, BitGo introduced institutional-grade DeFi, NFT, web3 offerings, and the Go Network. In 2023, it secured $100M Series C financing, valuing the company at $1.75B. BitGo supports 800+ digital assets, processes 20% of on-chain Bitcoin transactions, and serves over 1,500 institutional clients across 50 countries.

For more information, please visit www.bitgo.com.

©2024 BitGo Inc. (collectively with its affiliates and subsidiaries, “BitGo”). All rights reserved. BitGo Trust Company, Inc., BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless. The information provided herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. BitGo is not directing this information to any person in any jurisdiction where the publication or availability of the information is prohibited, by reason of that person’s citizenship, residence or otherwise.