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Bitcoin transaction fees drop
Bitcoin transaction fees drop
Bitcoin

Bitcoin transaction fees drop

By Marco Cavicchioli - 8 Jun 2020

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After the recent decline in difficulty, there has been a real drop in fees on bitcoin transactions. 

After the halving, the block time rose to a peak of over 14 minutes on May 17th, with a sharp drop in daily confirmed transactions. 

In particular, on May 24th these were only about 214,000, while on the day after the halving they were 345,000. 

This very significant reduction in the number of confirmed daily transactions had caused the cost of fees to literally soar

The average fee rose from $0.6 at the end of April to over $6, with a post-halving peak of $6.6 on May 20th. 

In the same period, the median fee went from $0.3 to $3.9 on May 20th, following the same trend. 

Now everything seems to be back to normal, with the daily average fee back to around $1, while the median returned below $0.4. 

In other words, compared to the peak on May 20th, the drop was more than 84% for the average and more than 90% for the median. 

This collapse is due to a drastic reduction in block time, which fell back well below 10 minutes, bringing the number of validated daily transactions back to around 300,000. 

To tell the truth, these are still very few, especially when compared to the almost 1 million daily transactions that the Ethereum blockchain is processing these days. 

The fact is that the maximum limit of 1MB for Bitcoin blocks prevents from validating more than about 3,000 transactions per block, and since a block is usually mined every 10 minutes, it is rare to exceed 350,000 transactions per day. 

This leads to higher fees being charged when the Bitcoin blockchain is most congested, because it is precisely based on the fees that miners choose which transactions to include, or not, in the blocks they mine. 

However, it must be said that, although there are no plans to change the 1MB block size limit, there are already alternative solutions that allow moving BTC with significantly lower costs. 

First of all, there is Lightning Network, which, although not yet widely used, drastically reduces fees thanks to off-chain transactions. 

In addition, paradoxically, the Ethereum blockchain could help, thanks to ERC20 tokens such as WBTC or pBTC, which allow transferring value equivalent to that of BTC but using the Ethereum blockchain, and not that of Bitcoin. 

This solution is increasingly used and given that with the likely future introduction of Proof-of-Stake on Ethereum, replacing Proof-of-Work, the volume of transactions manageable by this blockchain will be even greater and with lower fees.

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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