Out-of-band payments are sent to miners outside of a network’s typical process for collecting transaction fees into new blocks. The existence of out-of-band payments infers that the Bitcoin transaction fee market serves as only an estimate for actual demand for blockspace.
How are out-of-band payments sent?
These payments can be sent via legacy payment rails, such as with an ACH or wire transfer. Other protocols like Ethereum often include options for direct payment within a new block itself from a transactor to a miner as part of the new block’s coinbase. Fees tucked in the coinbase can also be difficult to navigate as they can rely on secondary relay networks like BloXroute for determining the exact payment amount.
Out-of-band payment schemes are often created on contractual terms, meaning customers and miners receive flat rates regardless of Bitcoin fee market volatility. However, some relay networks construct fees that loosely track the on-chain fee market.
Read: How do miners make money?
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