Bitcoin’s long-term growth has given many investors confidence that crypto is better held than spent. On the eve, one more argument was added to this: now it is more expensive to transfer BTC over the network than ever before, that is, the commissions for transactions with the main cryptocurrency have reached an all-time high.
According to the BitInfoCharts platform, the average cost of transferring Bitcoin has even surpassed the $ 62 mark. Let’s talk about the situation and its reasons in more detail.
$ 62 per transfer is more expensive than transactions during the peak of the last bullish trend in December 2017. Recall, then, the average transaction cost was $ 55.16. Accordingly, for sending cryptocurrency from your own wallet to the exchange, you had to pay such an amount.
In general, in the last few days alone, the average transaction fee has grown by more than 300 percent, after all, on April 11, it was $ 14.86. This means that it is less and less convenient for users to make any transfers in this cryptocurrency. In addition, this level of commission kills the prospect of small payments, because hardly anyone would agree to pay $ 60 to send the equivalent of $ 20 in cryptocurrency.
What is the reason for this? Simply put, many coin holders are now using the cryptocurrency network. And the more people transfer BTC, the higher the competition for getting a transaction into a new block and carrying it out.
Why is it so expensive to send bitcoins?
If you want to make a transaction on the Bitcoin blockchain, you need to pay a commission to the miners. Miners use powerful hardware to solve complex problems, which in turn are designed to add new blocks to the existing blockchain. When a transaction hits a block, it is considered completed. Before that, users have to wait for their turn and monitor the process of adding blocks.
It can last long enough. For example, on Monday it took 122 minutes to create a Bitcoin block number 679 786 instead of the usual 10 minutes. This means that users of the BTC network simply could not send cryptocurrency within two hours.
Block 679 786 in the Bitcoin network
Miners are rewarded in BTC for their work, but if the network is busy – that is, many people want to move their coins – they will have to pay even more. The main reason for the need for high competition is that the technical capabilities of the Bitcoin network are limited. It can handle no more than 7 transactions per second.
Although the above numbers are only valid for those who want to send a transaction in the nearest block. And if you are willing to wait, then the commission can be reduced within reasonable limits. Miners add new transactions to the block according to the priority of commissions. This means that those who pay more send their coins faster.
According to developer Leon Johnson, the problem can be solved using the Lightning Network – the second layer of the Bitcoin protocol, created to conduct cheap and almost instant transactions. Here is a quote from an expert in which he shares his own thoughts. The cue is from Decrypt.
Bitcoin can be both digital gold and digital money – I find these concepts complementary. In the long term, blockchain fees will rise, but I see technologies like the Lightning Network will make life easier for users.
Note that the Lightning Network has existed for a long time, but the network has not gained massive popularity. The reason for this is the complexity of working with LN. This requires a deep understanding of blockchain operation and extensive experience in interacting with cryptocurrencies. Roughly speaking, this network is not suitable for ordinary users, so many still prefer to carry out transfers in the usual way on the main network and not touch additional block chains or the so-called sidechains.
Right now, Bitcoin is mostly seen as a store of value, especially by large investors. But if most ordinary people someday decide to use crypto to pay for everyday things, they may have to resort to altcoins, where the throughput and transfer speed is much higher. At the same time, according to Johnson, such coins sacrifice decentralization for the sake of convenience.
We disagree with this point of view. The same Ethereum is in no way inferior in the degree of decentralization to Bitcoin, because each participant in the network – that is, a node – confirms transactions and the correctness of what is happening in the blockchain. Therefore, this statement is more like a replica of an altcoin lover who sees them as a threat to BTC.
We believe that in this situation there is nothing surprising, especially since this has happened before. The Bitcoin network is limited in its capabilities, and the blockchain is unlikely to significantly improve in the future. This means that when a large number of people use the network, it will slow down. At the same time, investors will be forced to pay huge commissions.
Most likely, this situation will end with a partial transfer of funds from BTC holders to altcoins. Nevertheless, translations in them are much cheaper.