Are Bitcoin Network Fees Too High? Is A Solution Just A Few Clicks Away?
Not a single day goes by without someone complaining about transaction fees on the Bitcoin network. The ignorance of a vast majority of Bitcoin users is fuelling a lot of anti-Bitcoin propaganda, as gullible users are being poorly advised to desert Bitcoin for centralized and poorly secured blockchains.
As of this writing, the fastest and cheapest transaction fee is 800 satoshis/byte. This translates to roughly 180,000 satoshis or 0.0018 for the median transaction size of 225 bytes. The number of unconfirmed transactions in the mempool is at 239,000 and growing. Many propagandists, bearish bitcoins and FUD mongers are using these statistics as a stick to beat Bitcoin with.
What none of them will ever tell you is that the remedy for both high fees and the significant backlog of unconfirmed transactions are readily at hand. In fact, it has been around for 4 months!
Scaling Is a Blockchain Problem
Bitcoin boasts the largest cryptocurrency network with roughly 10 million active users. No other network currently has even 10% of Bitcoin's network size. If developers, miners or users from other networks promise better performance, they're lying through their teeth.
Without actually having a network as huge as Bitcoin, it's impossible to determine the complexities that come with it. It would be like an e-commerce arriviste out of obscurity claiming it can outperform Amazon if only they had a similar scale of user base.
Scaling and other attendant ailments are not exclusive to Bitcoin. It's a blockchain problem. Building blocks of transactions through a process of distributed, decentralized validation without compromising network security is no mean feat.
In proof-of-work consensus model, such secure validation is even more difficult to accomplish. For the time being, Bitcoin still has the most secure, long-term solution to this inherent blockchain bugbear.
SegWit(Segregated Witness), if you still haven't heard, was a backward-compatible soft fork which was activated on the Bitcoin network on August 24, 2017.
By separating the witness section(signature) of a transaction from the Merkle tree(sender and receiver data) and appending it to the end, SegWit effectively allows each block to hold four times as many transactions without increasing the block size and compromising security.
Further, by removing signature data from transaction data, SegWit also addresses a security vulnerability known as transaction malleability. This enables Bitcoin to implement an off-chain state channel like Lightning Network to process instant transactions at zero fees. Lightning Network was tested on main net a week ago and its implementation is imminent.
SegWit address = Low fees
Bitcoin network currently processes between 6-7 transactions per second. A new block is generated every ten minutes. Each block processes roughly 2000 transactions.
A bitcoin transaction cost is determined by two factors – network congestion and how much other users are willing to pay as fee. Miners will always pick transactions with the highest fees. When the network is congested, users are forced to pay more for their transaction to get prioritized.
Transaction fee is based on satoshis per byte. A transaction sent from a SegWit address is almost four times lesser in size than one sent from a non-SegWit address. If every transaction contained within a block were from a SegWit address, 8000 transactions would be processed in a single block.
Those 239,000 unconfirmed transactions? They'll all be gone by tomorrow. Without network congestion and four-fold increase in rate of transaction processing, transaction cost would go down by 90%.
Not just that. When Lightning Network goes live, everyone would be immediately able to use it for free off-chain transactions. You heard it right, free! There's only a one-time fee to open a channel but with SegWit, that fee would only be a nominal amount of satoshis.
Start Campaigning For SegWit
Currently, not all wallets and exchanges support SegWit. If your exchange or wallet provider has not implemented SegWit, storm the bloody bastille and campaign for an immediate implementation.
Visit https://bitcoincore.org/en/segwit_adoption/ to find out whether your wallet/exchange supports SegWit.