The Mysterious Entity that Caused the Bitcoin Network fees to Jump 146% in May

Bitcoin price has yet again taken a dive to $8,800, recording a drop of 4%.

Meanwhile, Network Demand Score which is a metric incorporating network velocity, transaction value, fees, and miner's rolling inventory, climbed to 6/6 following the bitcoin halving meaning the network is growing stronger which could also be a sign that “we're in a longer-term bull market.”

Since March 12th, just before the massive sell-off, this score has remained above a 3/6 reflecting growing strength in network activity and instilling confidence in the ongoing uptrend for the bitcoin price.

3 Reasons why fees skyrocketed

One component of this indicator, bitcoin on-chain fees has been surging like crazy.

Last week, Bitcoin average transaction fee climbed to $7, last seen in February 2018. This has the miner revenues from fees rising to the levels not seen for more than 2 years. But this week, it also dropped 55% to $3.13.

The increase in transaction fees, which is increasingly becoming more important for Bitcoin network security, has been because of the unconfirmed transactions piling on in mempool.

A decline in hash rate following halving caused fewer blocks to be found and will continue until the next difficulty adjustment has been one of the reasons behind this jump in fees.

The other reason is the large fluctuations in bitcoin price which has traders sending coins between exchanges.

Ather reason is a “mysterious entity which has been consolidating outputs at the highest fee rates, driving up fees for everyone,” pointed out Serrrgej Kotliar, CEO Bitrefill.

Who is this “Crazy1o1”?

Over the weekend Kotliar shared how, for the past 14 days, this mysterious entity has consolidated a lower-bound of 720 thousand outputs, 5 MB per day, more than BitMEX.

Since May 1st, this entity named “Crazy1o1” has spent around 804k UTXOs and has paid more than 104BTC in mining fees during this time, noted Laurent.

“On some days, these fees are equivalent to 10-12% of all the fees received by miners,” he said.

Laurent along with others suspect this entity to be the cryptocurrency exchange Coinbase.

Earlier this month, it was also found that crypto derivatives exchange BitMEX is making the bitcoin network expensive for everyone and its own users are paying 6.8% of total daily transaction fees.

Prepare for the next bull market

All of this a “decent fire drill for what might happen if we see another bull market,” said Kotliar. Grubles from Blockstream said,

“On-chain fees and BTC price movements chart. You can see that big movements result in people rushing to transact (almost certainly to/from exchanges), pushing fees up for other non-trader users who need uncensorable / irreversible transactions.”

The fees reached its all-time high at over $55 during the peak of the bull market in December 2017. As such in the next bull market, a 5x growth in on-chain transactions should be expected.

But given that batching, one of the many ways the network has been scaled is here, it will prevent the pressure on the network from getting worse than 2017. But exchanges will need to be prepared for this.

Bitcoin (BTC) Live Price

1 BTC/USD =$9,246.3160 change ~ -0.83%

Coin Market Cap

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24 Hour Volume

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24 Hour VWAP

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24 Hour Change

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AnTy
AnTy
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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