During the past few weeks, bitcoin’s transaction fees have markedly increased and today, it typically costs around $20 to send a payment across bitcoin’s network. The reasons underlying this rise in transaction fees are rather complex but can be namely attributed to an increased number of transactions and the limited amount of transactions that the bitcoin network can handle per second. For today, the bitcoin network can process around 7 transactions per second.
Bitcoin Network Congestion:
Bitcoin price has skyrocketed during the past couple of months, reaching a historical high of around $20,000 earlier in 2017. The soaring bitcoin price has been associated with a steep rise in the number of transactions across the network, which led to great delays in confirmation of transactions. Some operations have been reported to be confirmed days after payments have been actually sent. During the past couple of months, the number of unconfirmed transactions has been constantly rising and according to blockchain.info, there are currently more than 180,000 transactions awaiting confirmation by miners.
How Are Bitcoin Fees Calculated?
The system used for calculating bitcoin’s transaction fees is totally unrelated to the number of coins sent throughout the transaction. Instead, transaction fees are calculated on a satoshi/byte basis, so the amount of fees you pay is related to the size of the transaction in bytes. Also, as the value of one satoshi has markedly increased, the transaction fees have skyrocketed too. The average size of a bitcoin transaction is around 226 bytes and with the current bitcoin price (1 BTC = $16,000), 1 satoshi is worth around $0.00016 USD. According to bitcoinfees.info, the fees needed to get your transaction confirmed within 30 minutes (i.e. included within the next 2-3 blocks) are around $20.43.
The least amount of fees one can pay today equals $19.63, which would get your transaction confirmed within 6 blocks (around 1 hour), yet with the increasing number of piled up unconfirmed transactions, the delay in confirmation of your transaction can reach infinity, if you choose to pay the least possible fees.
As such, the rise in bitcoin’s transaction fees is more or less related to the rise in bitcoin price, which was mostly catalyzed by speculators, rather than those who believe that bitcoin is an ideal payment method that will render other payment methods obsolete. Nevertheless, the rising fees and long transaction confirmation times are the main obstacles hindering mass adoption of bitcoin. For example, Steam, the online gaming site, halted acceptance of bitcoin payments earlier this month, mainly because the high fees led to unreasonably high prices. Interestingly enough, according to Steam, when the site added bitcoin as an accepted payment method, transaction fees averaged around $0.20.
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