Not so long ago, the Bitcoin community was in a state of irreconcilable struggle due to different views on the problem of high fees. Some of them even decided to secede and create their own cryptocurrency, mainly to solve this problem..
However, today the average cost of sending a transaction on the bitcoin network has reached $ 3, or a one and a half year minimum, which suggests that the price of a cryptocurrency is not the only hard-to-predict value. The CoinDesk portal sorted out the details of this process..
The so-called “fees” are essentially payments for network maintenance. The same commissions are paid by users of SMS, VoIP, etc..
The performance of the bitcoin network is supported by thousands of computers synchronizing data in it. The network has a limit on the number of transactions processed over a period of time, so when there are too many people willing to transfer bitcoins, users have to pay higher fees to make their transactions a priority..
Along with the growing popularity of bitcoin last year, the costs of maintaining its network also grew, and at a certain interval, the commission for the transfer of one transaction was $ 25 or more.
So why has commissions dropped in recent days? The simplest answer is that users are using bitcoin less. If in December they sent approximately 400,000 transactions per day, then in the last 24 hours there were less than 200,000 such transactions..
“I think it’s simple,” says BitGo developer Mike Belshe. “The demand for transactions has dropped significantly”.
Another question is why it got lower, Belshe adds..
SegWit and others like it
Popular cryptocurrency commentator on Twitter, known as Armin van Bitcoin, rejoiced at the drop in fees, suggesting that the scaling controversy is a thing of the past, linking the positive changes to Segregated Witness, the scaling solution for Bitcoin’s blockchain, which has turned out to be the centerpiece of a lengthy debate..
His words are meaningful. SegWit lowers fees and increases blockchain throughput, however, it has not yet become widespread, so it is difficult to say what its real role in these events is, especially since there has been no significant increase in the number of SegWit transactions recently..
Belshe suggests that another positive factor could be the “grouping” of transactions, that is, the inclusion of several transactions in one, which some major cryptocurrency services began to resort to in light of the growth of fees.
Earlier, the Coinbase service reported that it was implementing this solution, and on Thursday, the ShapeShift exchange, which accounts for up to 2% of transactions in the bitcoin blockchain, began to do the same..
However, in practice, it is quite problematic to confirm that a particular service groups transactions, unless they themselves provide evidence..
“It is difficult to confirm this information with 100% certainty,” says Belshe, adding that even if one major exchange does this practice, users will be able to feel the change..
The emergence of such solutions suggests that the services operating in the bitcoin network are themselves able to partially solve the problem that has arisen without interfering with the cryptocurrency code..
“This is why Bitcoin Core is putting so much effort into developing second-tier solutions and so focusing on optimizing transaction sizes through various things like Schnorr and Bulletproofs,” explained XO Media CEO John Carvalho. “They are doing everything to reduce the impact of each type of transaction associated with Bitcoin, because they will have to be stored forever.”.
Bitcoin is no longer needed
Other critics, especially those who do not share the views of bitcoin developers about keeping block sizes small, argue fees have dropped as users began to abandon the largest cryptocurrency due to its unsuitability for everyday use..
“Bitcoin is not suitable for anything that requires low fees, so people are switching to alternative solutions. This leads to lower fees, ”says Ryan Charles, founder of Yours.
Charles was forced to abandon the bitcoin blockchain last year after trying several options until he finally settled on Bitcoin Cash.
It is possible that some users are doing the same. Payment service Stripe stopped accepting bitcoins in January, including high fees. BitPay, which for a long time allowed only bitcoins to pay for purchases, started integrating altcoins at the end of last year.
At the same time, if users are abandoning Bitcoin and looking for alternatives, it is not entirely clear where exactly they are going. Bitcoin Cash, which was conceived as a cheaper version of bitcoin, accounts for about 10% of the transactions of the original cryptocurrency..
“Apparently, high fees are not forcing people to switch to bcash,” says BitGo developer Jameson Lopp..
Bitcoin developer Meni Rosenfeld has his own opinion on this matter.
“The main reason for the drop in fees is not the proliferation of SegWit or the churn of users to the Bitcoin Cash network. It’s just that the craziness about buying cryptocurrencies is fading away, “he says..
And he is also right. The decline in the bitcoin rate led to the fact that fewer users began to search for information about cryptocurrency in Google and come to the cryptocurrency market. This can be confirmed by the fact that commissions fell not only in the bitcoin network, but also in the altcoin networks..
Charles shares this view.
“I wouldn’t be surprised if it turns out that Ethereum fees have also dropped due to the price drop. It may be that the demand for sending transactions has dropped across all blockchains. We went through a cycle of hype, ”he said..
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