Bitcoin Transaction Fees Drop To A Record Low in the Last Six Months Time
Bitcoin emerged as the most popular cryptocurrency of 2017 and there was a massive rush of crypto investors at the exchanges to grab a share of the cryptocurrency in their kitty. Not only retail investors, but even financial institutional investors showed a great interest in buying Bitcoin.
However, due to a massive rush of crypto investors, the Bitcoin network was later found to be clogged up and congested which resulted in a sharp surge in the transaction costs and huge delays in the transaction times. This violated the basic USP of using the blockchain technology for instant financial transactions. The result was that a growing number of investors were seen putting their money in other digital currency alternatives available in the market.
As more number of investors started moving away from the Bitcoin network due to its scalability issue, the share of BTC by market cap has considerably reduced to just 37% now, from 66% in December 2017.
The Bitcoin price since has been continuously moving sideways while going as low as $6,000 per coin from its high of $20,000 in December. However, a sudden change in the transaction cost of Bitcoin has been observed in the past with price of Bitcoin transaction dramatically dropping from $34 in December 2017 to below $1 this last Sunday.
One of the key reasons for this drop is that some have totally stopped using the Bitcoin network while other have derived an optimized and efficient way of using the network. As per the operational capabilities of the Bitcoin network, it allows for a single Bitcoin transaction to be made to multiple recipients simultaneously. This allows for packing of more payments into each block on the Bitcoin network that carries a limited amount of data.
Earlier, when the transaction costs were low, companies were not bothered to use such kind of optimizations at their end. With the rising fees, companies have now made this as the priority and the result is that in the recent weeks, the network has seen more number of outputs per transaction, thereby relieving the network congestion to a great extent.
Along with the cooldown of the demand, other important development on the Bitcoin network is the support for Segregated Witness - Bitcoin’s scalability upgrade - was added to the Bitcoin core client in the latest version released on Feb. 15, 2018. On Feb 21, SegWit support was added to Bitfinex exchange and even Coinable has said that it will implement this before the end of this month.
But many experts say that even SegWit is not a long-term solution. Under the SegWit format, although the network’s capacity gets doubled, it is limited to that. Beyond that is that user base on the network increases, it would further require more concrete changes in place.
One of the major developments expected this is the introduction of a second-layer Lightning network. This network will exist as a second layer on the Bitcoin blockchain which takes all the transaction off the blockchain and allows for significant expansion of the practical capacity of the Bitcoin network. Everyone in the crypto industry is eagerly waiting for the successful implementation of the Lightning network which could possibly take place by the year end.