Effective Value

A coin's effective value is its face value minus the fee its input will add to the transaction that spends it. It is the number Bitcoin Core's coin selection adds up, so the target stays fixed while the wallet searches: each coin already carries its own fee. The idea is from Mark Erhardt's 2016 thesis, which gave the formula as the coin's value minus the fee per byte times the bytes of an input, with the example of a 100,000-satoshi coin being worth 98,520 satoshis at 10 satoshis per byte behind a 148-byte legacy input. In native segwit terms an input is 68 vbytes, so a 10,000 sat coin is worth 9,932 sats at 1 sat/vB and 3,200 at 100 sat/vB; at about 147 sat/vB it is worth nothing.

Before effective values, the reference wallet picked coins first and estimated the fee afterwards, then picked again with the fee added to the target, a loop the thesis showed could compound fees by up to 30 percent. Branch and Bound used effective values from 0.17.0 (2018), and PR #17331 made every algorithm use them in 22.0 (2021). Since 26.0 the fee to bump a coin's unconfirmed parents is subtracted too, so an unconfirmed coin whose parent paid a low fee is worth less to the wallet than its face value suggests.

Three of the four algorithms only consider coins whose effective value is positive; the oldest, Knapsack, will still spend a coin at a loss, a leftover of its 2012 behaviour that the 22.0 change kept on purpose. A coin whose effective value is negative at the going rate is dust in the broad sense, the one that moves with the fee rate; the dust limit is the narrow one.

Go deeper in Which Coins Does Your Wallet Spend? - the three costs of a pick, the four algorithms, the waste metric that judges them, and when consolidating pays.