High amount of transaction fees in the Bitcoin network was one of the most discussed topics last year, but with the beginning of 2018, the cost of commissions has declined significantly and is now back to levels last November. According to the site CoinMetrics, currently, bitcoin miners collect less than a third of the peak amount December 2017.
The queue of unconfirmed transactions, which in December sometimes exceeded 100 thousand, now holding about 8-10 thousand transactions. The recommended size of the Commission is now about 160 Satoshi per byte, while in December the value was raised to 800. Given the relatively small current size of the queue, you can try to send the transaction and a lower Commission.
What could be the reason of reducing the cost of transactions in the Bitcoin blockchain? It really all comes down to falling demand or are there other factors? Try to understand.
A simple explanation for the low commissions
In 2017, the congestion of the blockchain of Bitcoin has led to higher transaction fees, caused by the fact that according to the Protocol confirmation receive transactions with higher commissions. This was facilitated by the fact that speculative interest in Bitcoin, amid the incredible growth of the price is constantly increased.
In early 2017, the average fee amount for a simple transaction of Bitcoin was about $0,30, and in December it reached a peak of $40, and on some days exceeded $70. In just one month, from mid-November to mid-December, the exchange rate of bitcoin has grown three times, so people who purchased bitcoins for the first time, did not care what amount they will pay for the transaction in the blockchain.
Is the chart from the site CoinMetrics demonstrates the bitcoin’s price and the average size of transaction fees.
However, in 2018, the price of bitcoin, and with it swept all the speculative madness began to decline, and the number of transactions in the Bitcoin network has decreased. According to Blockchain, the number of transactions that are added to the pool of memory per second, compared with the December records fell by almost half.
The number of transactions added to mempool in 1 second, is now at the level of may 2016.
Perhaps, reducing the amount of transaction fees bitcoin is associated with the weakening of the syndrome of loss of profits (FOMO), when people tried to buy some bitcoins before the price will soar to unattainable heights. A return to a more sober thinking has led to falling demand for space in blocks.
Because transaction fees are expressed in bitcoins, lower the price of the cryptocurrency could also mean reducing the cost of transaction in dollars.
Schedule with site CoinMetrics shows the level of correlation between the sizes of commissions in bitcoins and us dollars.
Other possible factors
Although the above reasons for the cost reduction of the commissions is more than clear, you may want to consider other factors.
One explanation that is quite popular in social networks, is that network bandwidth has increased with the continuing growth of hashing power. The average amount extracted per day units should leave about 144, but in January 2018, this figure increased to 164. On the other hand, this phenomenon is not new. In the years of frenzied growth of complexity — 2013 and 2014 — a day sometimes mined and more than 200 blocks.
According to him BitGo, Mark Erhardt (Erhardt Mark), bitcoin has long operated at a speed exceeding 10 units per minute because difficulty settings hashing is performed only once in two weeks. Because during almost every period of difficulty settings in the network Bitcoin adds more power hashing speed of mining blocks increases until, while the complexity will not be retuned. In fact, the ratio of the actual number of mined blocks to the default value equals the percentage change, over the period.
Figure 164 unit only slightly exceeds the normal value. Also worth noting is that in December the figure was 162. If you take the average number for the year 2017, the quantity produced per day units was equal to 153, which is not differs much from the default values.
Thus, if in December 2017 and January 2018 daily extracted extra 10 blocks, then we can talk about increasing the space in blocks over 600 MB, because the size of each block is slightly greater than 1MB.
In addition to increasing space through the increase in the number of blocks mined every day, there was still a number of improvements related to the use of the block chain users willing to create a transaction. Bitcoin researcher David Harding (David Harding) wrote about this recently in the Bitcoin Wiki. In his opinion, the methods reduce the fees for transactions should include the batching of transactions, Segregated Witness (SegWit), dynamic assessment commissions and the consolidation model UTXO.
The bundling of transactions occurs when payment is sent to multiple recipients in one transaction. Outputs provided by the website.today’s data show the increased use of packaging for 2017, including a significant increase since the beginning of November 2017. In another article, Harding States that this technique can provide up to 80% savings on commissions. However, this method is useful only to large operators transaction.
Another way to reduce the size of the commissions – use solutions SegWit, providing an increase in block size (and accordingly, block space). Currently, however, SegWit use only 14% of transactions.
Additionally, the reasons for the General decline of the size of the commissions can be some other factors, such as the consolidation of the UTXO and dynamic assessment commissions.
A relatively new site transactionfee.info bitcoin allows users to track the value of recent transactions. Site users can also get information about the kind of wallet, exchange or other service was used to create the transaction. This allows the site visitors to determine for themselves the service with the most effective fees.
Despite the fact that the Commission in the network of bitcoin fell, some wallets have not yet taken advantage of the new market state Commission.
For example, a popular service Coinbase has been criticized due to the fact that it does not use methods of packaging or SegWit. After that, the head of Coinbase Brian Armstrong (Brian Armstrong) said that currently the company is working on these methods of lowering commissions for clients.
After analyzing all this information, it’s easy to understand why transaction fees of Bitcoin since the beginning of the year so fell. However, a large number of different parameters identify one common reason for their downgrade. If in the future these parameters will change, the Commission may again very fast to take off.
However, if the fall of bitcoin will continue and he’ll go into a period of stagnation, fall, and user activity, and hence the number of transactions and commissions. These circumstances may give the developers time to finally come to grips with the final solution to the problem of scaling the blockchain.