Bitcoin Transaction Fees Favor Whales
- Over twice as many Bitcoin (BTC) transactions are being conducted since the past year.
- BTC transaction fees favor whales, or those who hold large amounts of the pseudonymous cryptocurrency.
Bitcoin Blockchain Registering Over 400,000 Transactions Per Day
Since April 2018, the number of BTC transactions has more than doubled. The blockchain processes around 400,000 transactions each day, which is about the same amount as what was seen when BTC skyrocketed to $20,000 in December 2017.
Due to an increase in the number of transactions on the network, BTC fees have shot up more than they’ve been in ten months. In terms of dollars per transaction, the cost is $4.87. The cost hasn’t been this high since the beginning of last year. If gauged in Satoshis per byte, the cost is at its highest level since June of last year.
18 Million Wallets Hold Less Than $100 In BTC
The problem is that the majority of these transactions taking place are from smaller wallets which are clogging the blockchain. According to BitInfoCharts, a total of 18,124,283 wallets currently hold more than $1 worth of Bitcoin, but less than $100 USD. As the result of current transaction fees, however, these users may be reluctant to send payments with Bitcoin.
Longhash in a blog post says:
“While this distribution may be a positive sign that Bitcoin is not just for the wealthy, high transaction fees could pose an obstacle for smallholders. Transaction fees serve as an incentive for miners to play a functional role in Bitcoin’s governance. They are determined by factors such as how congested the Bitcoin blockchain is at the time the transaction is taking place.”
Lightning Network Make BTC Transactions More Cost-Effective
The high transactions fees make it hard for small wallet holders to transact. The cost of sending a Bitcoin transaction is not determined by the amount of money being sent. This means that both small and large transactions can end up costing the same amount in fees.
The sheer number of small Bitcoin holders demonstrates the need for scaling solutions that combat the asset’s intermittently high transaction fees. BTC has been working on solutions that are designed, in part, to combat increased transaction fees, such as the Lightning Network (LN) and Segregated Witness (SegWit).