For Bitcoin users, the transaction fees for the past three weeks have been very expensive.
According to Blockchain.com data, the average cost of sending a BTC transaction soared from about $ 0.5 at the beginning of this month to $ 6.63 on May 21-an increase of more than 1000% in just a few weeks.
Trends in Bitcoin average transaction fees over the past 180 days, source: Blockchain.com
This means that in the case of the highest transaction fees, if users want to quickly transfer $ 10 worth of Bitcoin, they must use more than half of the transaction value as transaction fees.
But currently Bitcoin has not entered a bull market. In contrast, the 2017 bull market pushed Bitcoin’s average transaction fees to over $ 50 in a short period of time.
There are 3 factors behind the parabolic increase in Bitcoin transaction fees
Sergej Kotliar, CEO of Bitcoin startup Bitrefill, believes that there are three “main” reasons behind this parabolic increase in Bitcoin transaction fees.
First, he confirmed that the bitcoin halving that occurred about two weeks ago.
Although investors are extremely optimistic about Bitcoin’s halving, the halving caused miners’ income to decrease by about 50%, which forced some miners to shut down their ASIC miners. This in turn led to a reduction in the amount of Bitcoin blocks. Kotliar stated:
“The halving that many of you celebrated has caused the hash rate to drop by about 20-30%. This has resulted in less block production, and this situation will continue until the next 14 days after the mining difficulty adjustment.”
Secondly, the industry executive stated that there is a “mysterious entity”-that is, a series of Bitcoin addresses that seem to belong to the same private key-has been integrating Bitcoin “at the highest rate”, pushing up everyone cost of.
Analysis by Kotliar and a bitcoin data scientist shows that the entity has already spent approximately 72 bitcoins (worth about $ 650,000) in transaction fees, and merged bitcoin into a specific set of wallets through more than 720,000 transactions .
Finally, Kotliar believes that the recent fluctuations in the Bitcoin market have led to an increase in transactions between exchanges, making this a “pretty perfect storm.”
The importance of scalability solutions
Although the $ 6 transaction fee is not absurd-after all, the traditional payment track charges a few percentage points-but if Bitcoin wants to become a medium of exchange for people’s daily lives, this situation emphasizes the implementation of scalability solutions The necessity of the plan.
The current leading solution is the Lightning Network, which was first launched by Lightning Labs and Square. The network basically transfers most transactions to the secure second layer (Layer 2), where Bitcoin can transact between parties at a very low cost, quickly, and in a more private manner than the Layer 1 chain.
But so far, the application of the Lightning Network has not been tepid, and the infrastructure is still in its early stages.