Bitcoin Blockchain’s Average Transaction Fees Soared 900% Over the Last 3 Months to $15.65
Transaction fees are integral to any cryptocurrency trade, as they incentivize miners who validate exchanges on the blockchain. They also deter malicious actors who try to spam the network with spam transactions. As the number of transactions on the network increases, so does the demand for block space, leading to an increase in transaction fees.
Over the past three months, average Bitcoin transaction fees have skyrocketed by 900%. According to a BanklessTimes.com report, average BTC transaction fees were around $1.5 on February 10, 2023. But these had jumped to $15.56 on May 10, 2023.
Bitcoin Ordinals and Skyrocketing Transaction Fees
The primary reason behind this drastic increase is the introduction of Ordinals on the Bitcoin network. Ordinals are a new integration into Bitcoin’s blockchain, supporting the creation of non-fungible tokens (NFTs) and BRC-20 tokens. The latter is central to creating meme coins.
NFTs and meme coins have become increasingly popular among investors and traders. It has resulted in an increasing demand for their transactions on the BTC network, consequently pushing up transaction costs.
BanklessTimes’ CEO noted:
What is the impact of increasing BTC transaction fees?
As mentioned earlier, the sky-high transaction fees affect BTC miners and end users. Miners prioritize transactions with higher fees, meaning those with lower fees may take longer to process. This has affected small-scale exchanges on the network, where users now have to pay more to verify them.
High transaction fees can put small-scale transactors in a challenging spot since they will be less inclined to use Bitcoin for smaller exchanges. Fortunately, Lightning Network is an option that is popular with users.
Built on top of the Bitcoin blockchain, the Lightning Network acts as a second layer to the Bitcoin network. It allows users to process transactions faster and for a significantly lower fee.
What does the future hold?
If this trend continues, it could lead to serious implications such as centralization of mining power due to higher profits from larger block rewards or even a decrease in the overall use of Bitcoin due to its expensive nature compared to other blockchains such as Ethereum or Litecoin.
It remains to be seen how long these high transaction fees will last. But one thing is certain; If left unchecked, these high transaction fees can further centralize mining power and limit user access to certain services within the cryptocurrency space.
Thus, developers and miners must ensure that Bitcoin remains accessible to all users regardless of their financial capabilities or geographic location. As the industry searches for long-term solutions, experts have urged the Bitcoin network to address high transaction fees.
Merry states that lowering transaction fees will improve Bitcoin’s reputation and increase its use case and appeal.