Network Transaction Fees For BTC Hit A Three-Year Low Thanks To SegWit And Lightning Network
Transaction Fees For BTC Hit A Three-Year Low Thanks To SegWit And Lightning Network
Transactions fees for the BTC reached a three-year dip, according to BitInfoCharts. It is estimated that the transaction fees have reached an average of just $0.029. Kevin Rooke, a crypto community researcher said that on Twitter the BTC fees had not reached this low since October 2015. At the time, BTC was trading at $270.
In the tweet, Rooke said that on January 1, 2019, the median trading fee for BTC had been 40.02 with 234,576 total transactions. On October 13, 2015, the median transaction fee had been $0.02 with 134,741 transactions in total.
Points Worth Noting
As Kevin Rooke mentioned in a reply to the tweet, this does not mean that BTC network is processing fewer transactions. Rather, it was processing 75% more transactions but at the same fee. Thus, this means that its efficiency had significantly improved.
Recent data shows that the network is processing 200,000 to 250,000 transactions daily. However, tech developments such as SegWit in August 2017 ensured more transactions could be processed. This is because the size of each transaction is decreased via the segregation of large chunks of data, which had been previously contained inside the transaction.
The LN Solution
Another development was the lightning network, which is a two-layer-scaling solution developed for BTC. It has played a crucial role in scaling. 1ML data shows that it has a capacity of more than 557 BTC. It also has more than 5,150 nodes and more than 18,500 open payment channels. While transactions on the lightning network are not processed on the blockchain, the second layer protocol ensures there is less congestion on-chain.
At launch, the layer-two scaling was not user-friendly. As a result, adoption was slow but steady. As user-friendly solutions continue to be introduced, many in the community believe that it will one day achieve its full potential. Recent reports indicate that developers have come up with an LN BTC wallet, which is said to be quite easy to use.
The Transaction Fee Spike
In December 2017, the BTC network was dealing with 450,000 transactions daily. This was at around the same time when prices for BTC reached $20,000. Due to the amount of data on the BTC network, it led to a lot of clogging. The processing times for each transaction grew and so did the processing fees. This led to the processing fee for a single transaction reaching a dizzying $34.
The Bear Market
A point worth noting is the year-long bear market that has characterized the crypto markets in general. In December 2017, the price hit a high of $20,000. However, most of those gains were wiped out in 2018 with prices dipping to as low as $3,200 and then recovering to $4,000 recently.
This dip led to many major investors abandoning the BTC. As a result, it lowered the high-fee transactions taking place on BTC. The average transaction fee currently stands at around $0.18, which might be due to lower high-fee transactions.