Bitcoin’s (BTC) transaction costs are currently at their highest level since early 2018. As a result of the price increase and therefore increasing interest and the decrease in computing power, the network is under enormous pressure.
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The increase in the cost of a Bitcoin transaction began on 26 October. The price fluctuated around the level of $13,000. Two days later, on 28 October, transaction costs peaked. At the time of writing, one Bitcoin costs around ~$13,250.
Several websites reflect these costs. It shows that users are constantly raising the bar in an attempt to complete their transactions quickly. You can easily pay 1 sat/byte per transaction, but then you have to wait a very long time. Apparently there are less and less people doing this.
On Bitinfocharts you can see that the average transaction costs were over $11 on 28 October. This was the highest level since the end of January 2018. At the time, this average was ‚only‘ $6.88. By the way, the graph above shows the moving average, taken over seven days.
Glassnode also notes that the percentage of income that miners derive from fees has risen to its highest point since January 2018.
The cost of a Bitcoin transaction increases due to a number of protocol parameters. A few years ago, Bitcoin chose to scale with the Lightning Network outside the blockchain. As a result, the prerequisites for getting a payment in a block are very strict:
- one block per 10 minutes on average;
- in such a block a maximum of 1MB of payments is allowed (excluding SegWit);
- the miners choose from the mem pool the payments with the highest fees.
The decreasing computing power due to the end of the rainy season in China (and the miners who are therefore moving) does not make it any easier.
The combination of these factors ensures that the payments with the highest transaction costs are given priority. As the number of transactions increases (due to a price increase, for example) the mem pool becomes fuller. This can also be seen in the image below.
While transaction costs increase, there are also a lot of unconfirmed transactions. They are all waiting to be blocked by a miner.
The number of unconfirmed transactions in the memo pool rose to 156,000 on 28 October. This was also the highest number since January 2018.
By the way: Bitcoin payments do not necessarily have to be expensive. You can use all kinds of on-chain tricks (such as batching and segwit addresses) to still save costs. And if you’re not in a hurry, you can also add 1sat/byte to the payment.
There is also a second layer on top of Bitcoin: the Lightning Network. This allows you to make fast and cheap payments. THNDR Games is a textbook example of this.