Bitcoin

Bitcoin transaction fees briefly doubled but remain exceptionally low

Bitcoin transaction fees briefly doubled but remain exceptionally low

Do you have Satoshi to send or Bitcoin (BTC) wallets to rearrange? It’s getting cheaper and cheaper to do it. According to a report by Arcane Research, Bitcoin “transaction fees have remained low since July 2021, showing no signs of increasing.”

Bitcoin means tx fees remain very low despite a small uptick last week. Source: Arcane Research

There was, however, a small hike in transaction fees last week. Shown as a small jump at the end of the chart, the mempool consolidation caused “average transaction fees per day to rise over the past seven days to $691,000, a doubling since last Tuesday.”

Nevertheless, the doubling of transaction fees is insignificant: transaction fees remained in a low range. The miners completed the mempool transactions over a two-day period, securing the network while keeping transactions affordable.

Eric Yakes, author of the Bitcoin book, The 7th property, told Cointelegraph that there are three main reasons transaction costs are so low: Segwit adoption, hash rate redistribution, and Bitcoin’s Layer 2 infrastructure, such as the Lightning Network. almost instantaneous payment, which starts.

“June 2021 saw a sharp increase in the percentage of on-chain Segwit transactions from ~50% to ~70%, which has steadily increased to over 80%, which should fundamentally increase transaction throughput for the network.”

Cointelegraph reported on the growing number of exchanges using Segwit addresses during 2021.

In July 2021, Yakes explains that “network difficulty bottomed out and has since shifted to ATHs,” following China’s ban and hash rate redistribution. Combined with the increase in the number of Segwit transactions:

“This hash rate bounce found blocks faster than the difficulty adjustment can keep up and it created trade clearing faster than otherwise, thus lowering the price of trades.”

However, Yakes mentions that transaction fees “should not remain persistent. Eventually, and it all depends on price, hash rate and difficulty will find their equilibrium, making the fee market less competitive and increasing transaction costs.

Tomer Strolight, editor of Swan Bitcoin, cites another factor as to why transaction fees are low:

“We have the biggest exchanges all bundled deals now. This means that they send 100 or more withdrawals on a single transaction instead of the terrible practice from several years ago of sending each withdrawal in one.

Additionally, with the Lightning Network’s ability to open “channels when the blockchain isn’t congested, and then use them over and over again, prevents the chain from being congested whenever a faster and less lightning transaction expensive is an option”.

Map of Lightning Network nodes and channels. Source: explorer.acinq.co

The Arcane research report states that while these four factors are important, it is also “likely that fewer transactions per day lowered average transaction fees.”

For Yakes, “transaction fees could go up in the short term, but there are so many trends against higher transaction fees that I think they will be consistently lower in the long term.”

Related: Bitcoin back to $42,000 as markets await potential 7.9% CPI inflation data

Tomer is also positive:

“I really see that we can gradually build the capacity of the network to handle all commerce in the world without blockchain becoming an insurmountable bottleneck.”

This is another feather for the BTC ceiling: the protocol continues to successfully evolve, making it more affordable to transact on the network.