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Why are Bitcoin Transaction Fees Constantly Changing?


Why are Bitcoin Transaction Fees Constantly Changing?

One of the advantages of using blockchain is that it is supposed to make transactions cheaper than using other conventional payment methods. However, transaction fees associated with moving bitcoin around have been substantial over the past year or so.

Thankfully this is something that is now changing, as the average transaction fee has fallen from $26 down to $3, which is the lowest this fee has been over the past year and a half. The varying costs of transaction fees illustrate how it is not just the price of bitcoin that is volatile; the average fee is also unpredictable.

There has been a lot of debate in recent times about the size of the transaction fees, and it even prompted a group of miners and investors to create a brand new version of bitcoin to have lower fees.

These “fees” are mainly the transaction costs that ran up as a result of using the network and are a charge that is similar to having to pay someone to deliver the protocol server, such as an email or SMS.

As there is a limit in place as to the quantity of data that can be processed in given intervals, there will have to be a premium paid by consumers to have their transactions processed when the network is congested.

Number of Transactions Declining Brings Fees Down

With the popularity of bitcoin exploding in 2017, this saw network congestion increase and subsequently the average transaction fee also skyrocketed with it. Since the end of December, these fees have been in a constant decline, something that has been welcomed by bitcoin users.


The main reason for the fees drastically lowering has been due to the lower number of transactions that have been taking place. In December 2017, there were on average 400,000 transactions conducted on a daily basis, with this number being closer to 200,000 in February 2018.

There has been a lot of chatter among the bitcoin community as to what other potential reasons there may be for these decreases that have been observed as of late. Some people are of the belief that there is no longer any need to worry about scaling debates, as they believe that the adoption of Segregated Witness (SegWit) will solve the issues that lie at the core of the bitcoin fees debate.

There are merits to this argument as SegWit has led to lower transaction fees, as well as freeing up additional space on the blockchain. However, there has been no noticeable shift in the use of SegWit, sitting at between ten and 14 percent of total transactions in recent months.

More Firms Begin “Batching”

Another argument that is being made is that the significant fees that have been observed finally forced some of the processors of large transactions to begin the implementation of a process called “batching” that brings transactions together into a single bundle which means that additional space is freed up on the blockchain.

Finally, many people are citing the disgruntlement seen by bitcoin users at the significant fees as being a catalyst for them leaving this cryptocurrency behind for good and turning to other options, hence the significant decrease in transaction volume.

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