What are the consequences of the increasing transaction fees of Bitcoin for private users and companies?
This week, Adam Back and Bruce Fenton discussed the possibility that the fee for bitcoin transactions could increase to $ 20 - or even $ 100. Keep in mind that most people have so far regarded such news with a degree of untruthfulness.
No one would deny that there is a high need for the security of the Bitcoin network. However, the high transaction fees change the way the digital currency is handled, both for private users and for companies. The average transaction fees increased by 155% in the first quarter of 2017 alone.
The graph of blockchain.info provides detailed information about the average transaction fees of recent years.
In view of this, the debate between Back and Fenton is more realistic. Such high transaction fees are acceptable for companies, provided that a high level of security and reliable transactions are guaranteed. Nevertheless, you will always remember the times when the transaction fees were almost zero.
Due to the low transaction fees, small transactions could be carried out. Since the transfer was very simple and the speed was much faster compared to conventional institutions, it was worthwhile to carry out smaller transactions at this time, such as ordering a coffee or a beer. However, the Bitcoin network is not designed for such transactions.
The consequences for startups
However, it is interesting to see the implications of the increased transaction fees on startups established at a time when the charges were still far below the current values. Two women entrepreneurs expressed their opinion as a result of the increase in fees.
Sheryl Carr is CEO and co-founder of Quid Smart Vendor, a point-of-sale solution for retailers around the world. It does not regard the high transaction fees as a problem, as banks charge even higher fees for international payments. "Many of our partners work internationally, which is why we have integrated a currency calculator into our directory," she said.
She believes Bitcoin is still competitive, even if transaction costs for bitcoins will be as high as the alternative ways to send money internationally. For current services, exchange rates are sometimes up to 17%.
Unfortunately Carr feels a certain reluctance of the consumers to spend the bitcoins. This holds them a core problem.
"At the moment, we see few customers using Bitcoin - it really does not have any traction. There are few traders who currently accept Bitcoin. This is primarily due to the fact that customers do not want to output Bitcoin. Believe me - EVERY dealer would love to accept bitcoin, as long as someone would pay with it! Would not you? I think the problem is on the side of the customers, not the dealers. "
In the case of start-ups specialized in micro-payments, the increased transaction fees have a higher impact.
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Neha Murarka is CEO and founder of smoogs.io. The company offers solutions for micro-payments in the digital space.
"The increase in transaction fees has dramatically impacted our business model," she said.
"I am sure that some companies whose products are associated with Bitcoin will face some challenges. Specifically, the companies that use Bitcoin solely for payments. In many cases it has become cheaper to use a credit card or a debit card. This effect is even more acute for startups like smoogs.io, which work with micro-payments. "
However, Murarka, as well as Carr would like to emphasize that it is not just about transaction fees:
"However, we must remember that Bitcoin has not been made to reduce transaction costs. The innovative and interesting ways to use Bitcoin are much more important. "
An innovation such as the Lightning Network would ultimately offer a solution for companies with low payouts by cryptography. However, there are other voices which consider this approach to be questionable. Building a business as the platform evolves, the critics compare with the construction of a house on Treibsand.
One thing is clear: Companies that are stubborn enough to adapt and recognize the clear advantage of Bitcoin will also benefit from a system with higher transaction fees. They will prove that they are able to overcome such changes and even thrive in such a challenging environment.