Bitcoin’s transaction costs rose to their highest level since August last Thursday. If payments are going to be a little bit more expensive, we have to compare them with early 2018, when the Bitcoin mania peaked.
Bitcoin transaction fees
Transaction costs have risen sharply in recent days. On BitInfoCharts you can see how this has been going lately.
Over the last four days, we have seen a sudden peak, an increase of 231%. It is, of course, the result of Bitcoin’s price increase. People are becoming active and doing more on-chain transactions, for example, to and from stock exchanges.
Last Thursday, it cost an average of $6.3 to get a transaction in the Bitcoin blockchain and the news Spy. The cost had not been as high since the beginning of August. Yesterday, these costs fell to an average of $5.7.
Looking at the chart, the current situation is comparable to August and May 2020, July 2019 and June 2018. At that time, costs did not rise any further. This did happen at the end of 2017, to an average of more than $50 per transaction. If you compare the last three years with 2017, it is not all that bad now.
Full memo pool
The cost of Bitcoin increases due to a number of parameters of the protocol:
- one block per 10 minutes on average;
- a maximum of 1MB of payments (excluding SegWit) is allowed in such a block;
- the miners choose from the mem pool the payments with the highest fees.
The combination of these factors ensures that the payments with the highest transaction costs are given priority. If the number of transactions increases (e.g. due to a price increase), the mem pool becomes fuller. This can also be seen in the image below.
By the way: Bitcoin payments do not necessarily have to be expensive. You can use all kinds of on-chain tricks (such as batching and segwit addresses) to save on costs. And if you’re not in a hurry, you can also add 1sat/byte to the payment.
There’s also a second layer on top of Bitcoin: the Lightning Network. This allows you to make payments quickly and cheaply. THNDR Games is a textbook example of this.
With their mobile Lightning game, they have already handled more than 150,000 transactions for an average of 0.59 sats per payment (0.00064 euros).