10 ms·

Avg. Transaction Fee of Bitcoin Surpassed the Peak from 2017

43 points by noxer 6y ago

dmm 6y ago
What happened in 2017? What's happening now? Is it related to miners being shutdown in China?
- gruez 6y ago
  transaction volume went up. the date roughly corresponds to the last peak of ~20k. high prices/volatility means more people rushing to transfer their coins in/out of exchanges.
- QuestionC 6y ago
  People are panicking over Biden's ridiculous proposed capital gains tax changes. Everyone's panic selling and hiding assets. 2017 was the previous Bitcoin pump and panic.
dane-pgp 6y ago
Failing as planned.
rawtxapp 6y ago
That's because you're looking at it in terms of USD, when you look at it in terms of satoshis per byte, it's actually much lower [1][3]. And if you want to avoid the fees because you expect to transact a lot, just use lightning network, exchanges are starting to integrate it[2]. edit: I should also add that, when you look at it in terms of USD, the average transaction fee is a drop in the bucket compared to the average transaction value [4], which to me says that it's becoming the settlement layer as expected. 1: https://statoshi.info/d/000000017/fee-estimates?orgId=1&from=now-5y&to=now https://statoshi.info/d/000000017/fee-estimates?orgId=1&from... 2: https://www.coindesk.com/okex-exchange-to-integrate-bitcoins-lightning-network-for-faster-cheaper-transactions https://www.coindesk.com/okex-exchange-to-integrate-bitcoins... 3: https://www.bitcoinfees.info/ https://www.bitcoinfees.info/ 4: https://bitinfocharts.com/comparison/transactionvalue-btc-xrp.html https://bitinfocharts.com/comparison/transactionvalue-btc-xr...
- ccortes 6y ago
  > which to me says that it's becoming the settlement layer as expected To me it says that only rich whales get to transact in bitcoin. Pretty sad that now regular people get excluded from something that was conceived as p2p internet cash.
  - rawtxapp 6y ago
    Not really, it just means big centralized companies are settling their end-users funds on the blockchain while providing them access to it practically free. Regular people right now use it through Paypal, Cash app, Venmo, Coinbase, etc. And soon enough channel factories should make it possible to create multiple lightning channels at once, so an end-user will never pay the whole channel opening fee by themselves. As long as Bitcoin's layer 1 stays secure/open/decentralized, the average non-whale user will be able to use it through these other layers just as easily.
    - AlexandrB 6y ago
      > Regular people right now use it through Paypal, Cash app, Venmo, Coinbase, etc. So people are using Bitcoin through trusted (in the security sense[1]) intermediaries. These intermediaries are basically banks, no? Aren't they subject to all the same bad incentives as a "traditional" bank? Except their deposit are (probably?) not insured against loss. [1] https://en.wikipedia.org/wiki/Trusted_third_party https://en.wikipedia.org/wiki/Trusted_third_party > 'Trusted' means that a system needs to be trusted to act in your interests, but it has the option (either at will or involuntarily) to act against your interests.
      - rawtxapp 6y ago
        It's the short term option, yes. Well, they have to hold on to the coins, because once they lose it, they can't turn to Fed for a bailout. Lots of custodians have insurance in place [1]. In the long term, lightning is here and works, as exchanges keep integrating it, that's where most of the end-user funds for small amounts would live. 1: https://finance.yahoo.com/finance/news/bitgo-expands-cold-storage-insurance-194938290.html https://finance.yahoo.com/finance/news/bitgo-expands-cold-st...
swinglock 6y ago
This is the consequence of the sudden loss of mining power. The increased usage of Bitcoin transactions while the blockchain is now processing fewer transactions means the fees increase, because users are willing to pay that much to transact faster. Ideally market powers would offset this by people with spare CPU time beginning to mine to pick up the slack, since profitability is up. However due to the development of specialized mining hardware, mining isn't elastic anymore and so it doesn't happen. Because of that the fees will not decrease until the next difficulty adjustment which is every two weeks, or until the miners come back online.
- ahelwer 6y ago
  Here's a gap in my understanding: why does bitcoin mining explode so much when the price goes up? With all the new miners, doesn't the difficulty adjustment kick in after two weeks and largely negate the price increase? Or does the difficulty scaling not quite work like that?
  - X6S1x6Okd1st 6y ago
    The difficulty adjustment only goes up by a certain amount, and you'd only expect mining and difficulty to normalize when it's a margin driven business. If there is some limiting factor (e.g. not enough hardware, not enough power etc) or if price is increasing faster than bitcoin mines can come online then the difficulty adjustment can't keep up. Other coins have solved this, in fact bitcoin cash had to solve it as soon as the fork happened because it would have taken too long to hit an adjustment period.
  - swinglock 6y ago
    The difficulty is what adjusts the distributed time function of the network to stay on target, so that the inflation is controlled, measured in Bitcoins. The Bitcoin network only knows about Bitcoins, not how much USD it trades for. When the blocks being mined approximately every 10 minutes is valued higher in USD, naturally more people want more of those blocks. So the miners expand simply to compete, since what they compete for is worth more.
  - 6y ago
haolez 6y ago
I wonder what would happen with bigger blocks besides making the blockchain use more disk space. We have BCH and BSV to compare, but not in BTC's scale, I believe.
- gruez 6y ago
  initially? lower fees. eventually it will be offset by the induced demand and we'll be back to square one.
  - nivexous 6y ago
    By that argument, we should have capped Internet bandwidth at 56kbps.
  - bavell 6y ago
    We won't be back at square one even if the fees end up the same, since the transaction thoroughput would be higher. Bigger blocks means more transactions per block and at a constant rate of 6 blocks/hr that means the network can handle more TPS before fees rise. As long as the mempool remains relatively empty, fees will be low.
  - wmf 6y ago
    Imagine if they increased the block size and developed Lightning in parallel. On-chain fees would be low until Lightning becomes mainstream then Lightning fees would be even lower.
    - devname 6y ago
      Tried that in 2017, but the stream got blocked.
- devname 6y ago
  Bitcoin Cash has handled more transactions than small-block core for two months now. https://bitinfocharts.com/comparison/transactions-btc-bch.html#log&1y https://bitinfocharts.com/comparison/transactions-btc-bch.ht... Read the first page of the Bitcoin whitepaper: https://www.bitcoin.com/bitcoin.pdf https://www.bitcoin.com/bitcoin.pdf. It's a protest against fees and intermediaries. Now we see BTC claim to be Bitcoin, but it is crippled by high fees and custodial intermediaries.
diego 6y ago
All this means is that moving Bitcoin in the main blockchain is not practical for most people. Bitcoin is an asset for an elite. Those who are interested in frequent cryptocurrency transactions should not be even paying attention to Bitcoin.
- nivexous 6y ago
  It's worse. How do people think this will work? You will keep your money in institutions. Transfers will be settled in databases. There will be management fees, insurance requirements, dispute costs, censorship, and surveillance. Read the 1st page of whitepaper folks. High fees bring about the same trusted third-parties that Bitcoin was built to avoid.
etaioinshrdlu 6y ago
It seems like Wrapped Bitcoin (WBTC), a token on the Ethereum chain, could also be used instead to avoid transaction fees. Granted, ethereum has its own fees. The less popular chains tend to have lower fees.
- devname 6y ago
  Less popular? Bitcoin Cash BCH is handling more transactions than BTC, with insignificant fees.

43 points by noxer 6y ago

dmm 6y ago

What happened in 2017? What's happening now? Is it related to miners being shutdown in China?

gruez 6y ago
transaction volume went up. the date roughly corresponds to the last peak of ~20k. high prices/volatility means more people rushing to transfer their coins in/out of exchanges.
QuestionC 6y ago
People are panicking over Biden's ridiculous proposed capital gains tax changes. Everyone's panic selling and hiding assets. 2017 was the previous Bitcoin pump and panic.

dane-pgp 6y ago

Failing as planned.

rawtxapp 6y ago

That's because you're looking at it in terms of USD, when you look at it in terms of satoshis per byte, it's actually much lower [1][3]. And if you want to avoid the fees because you expect to transact a lot, just use lightning network, exchanges are starting to integrate it[2]. edit: I should also add that, when you look at it in terms of USD, the average transaction fee is a drop in the bucket compared to the average transaction value [4], which to me says that it's becoming the settlement layer as expected. 1: https://statoshi.info/d/000000017/fee-estimates?orgId=1&from=now-5y&to=now https://statoshi.info/d/000000017/fee-estimates?orgId=1&from... 2: https://www.coindesk.com/okex-exchange-to-integrate-bitcoins-lightning-network-for-faster-cheaper-transactions https://www.coindesk.com/okex-exchange-to-integrate-bitcoins... 3: https://www.bitcoinfees.info/ https://www.bitcoinfees.info/ 4: https://bitinfocharts.com/comparison/transactionvalue-btc-xrp.html https://bitinfocharts.com/comparison/transactionvalue-btc-xr...

ccortes 6y ago
> which to me says that it's becoming the settlement layer as expected To me it says that only rich whales get to transact in bitcoin. Pretty sad that now regular people get excluded from something that was conceived as p2p internet cash.
- rawtxapp 6y ago
  Not really, it just means big centralized companies are settling their end-users funds on the blockchain while providing them access to it practically free. Regular people right now use it through Paypal, Cash app, Venmo, Coinbase, etc. And soon enough channel factories should make it possible to create multiple lightning channels at once, so an end-user will never pay the whole channel opening fee by themselves. As long as Bitcoin's layer 1 stays secure/open/decentralized, the average non-whale user will be able to use it through these other layers just as easily.
  - AlexandrB 6y ago
    > Regular people right now use it through Paypal, Cash app, Venmo, Coinbase, etc. So people are using Bitcoin through trusted (in the security sense[1]) intermediaries. These intermediaries are basically banks, no? Aren't they subject to all the same bad incentives as a "traditional" bank? Except their deposit are (probably?) not insured against loss. [1] https://en.wikipedia.org/wiki/Trusted_third_party https://en.wikipedia.org/wiki/Trusted_third_party > 'Trusted' means that a system needs to be trusted to act in your interests, but it has the option (either at will or involuntarily) to act against your interests.
    - rawtxapp 6y ago
      It's the short term option, yes. Well, they have to hold on to the coins, because once they lose it, they can't turn to Fed for a bailout. Lots of custodians have insurance in place [1]. In the long term, lightning is here and works, as exchanges keep integrating it, that's where most of the end-user funds for small amounts would live. 1: https://finance.yahoo.com/finance/news/bitgo-expands-cold-storage-insurance-194938290.html https://finance.yahoo.com/finance/news/bitgo-expands-cold-st...

swinglock 6y ago

This is the consequence of the sudden loss of mining power. The increased usage of Bitcoin transactions while the blockchain is now processing fewer transactions means the fees increase, because users are willing to pay that much to transact faster. Ideally market powers would offset this by people with spare CPU time beginning to mine to pick up the slack, since profitability is up. However due to the development of specialized mining hardware, mining isn't elastic anymore and so it doesn't happen. Because of that the fees will not decrease until the next difficulty adjustment which is every two weeks, or until the miners come back online.

ahelwer 6y ago
Here's a gap in my understanding: why does bitcoin mining explode so much when the price goes up? With all the new miners, doesn't the difficulty adjustment kick in after two weeks and largely negate the price increase? Or does the difficulty scaling not quite work like that?
- X6S1x6Okd1st 6y ago
  The difficulty adjustment only goes up by a certain amount, and you'd only expect mining and difficulty to normalize when it's a margin driven business. If there is some limiting factor (e.g. not enough hardware, not enough power etc) or if price is increasing faster than bitcoin mines can come online then the difficulty adjustment can't keep up. Other coins have solved this, in fact bitcoin cash had to solve it as soon as the fork happened because it would have taken too long to hit an adjustment period.
- swinglock 6y ago
  The difficulty is what adjusts the distributed time function of the network to stay on target, so that the inflation is controlled, measured in Bitcoins. The Bitcoin network only knows about Bitcoins, not how much USD it trades for. When the blocks being mined approximately every 10 minutes is valued higher in USD, naturally more people want more of those blocks. So the miners expand simply to compete, since what they compete for is worth more.
- 6y ago

haolez 6y ago

I wonder what would happen with bigger blocks besides making the blockchain use more disk space. We have BCH and BSV to compare, but not in BTC's scale, I believe.

gruez 6y ago
initially? lower fees. eventually it will be offset by the induced demand and we'll be back to square one.
- nivexous 6y ago
  By that argument, we should have capped Internet bandwidth at 56kbps.
- bavell 6y ago
  We won't be back at square one even if the fees end up the same, since the transaction thoroughput would be higher. Bigger blocks means more transactions per block and at a constant rate of 6 blocks/hr that means the network can handle more TPS before fees rise. As long as the mempool remains relatively empty, fees will be low.
- wmf 6y ago
  Imagine if they increased the block size and developed Lightning in parallel. On-chain fees would be low until Lightning becomes mainstream then Lightning fees would be even lower.
  - devname 6y ago
    Tried that in 2017, but the stream got blocked.
devname 6y ago
Bitcoin Cash has handled more transactions than small-block core for two months now. https://bitinfocharts.com/comparison/transactions-btc-bch.html#log&1y https://bitinfocharts.com/comparison/transactions-btc-bch.ht... Read the first page of the Bitcoin whitepaper: https://www.bitcoin.com/bitcoin.pdf https://www.bitcoin.com/bitcoin.pdf. It's a protest against fees and intermediaries. Now we see BTC claim to be Bitcoin, but it is crippled by high fees and custodial intermediaries.

diego 6y ago

All this means is that moving Bitcoin in the main blockchain is not practical for most people. Bitcoin is an asset for an elite. Those who are interested in frequent cryptocurrency transactions should not be even paying attention to Bitcoin.

nivexous 6y ago
It's worse. How do people think this will work? You will keep your money in institutions. Transfers will be settled in databases. There will be management fees, insurance requirements, dispute costs, censorship, and surveillance. Read the 1st page of whitepaper folks. High fees bring about the same trusted third-parties that Bitcoin was built to avoid.

etaioinshrdlu 6y ago

It seems like Wrapped Bitcoin (WBTC), a token on the Ethereum chain, could also be used instead to avoid transaction fees. Granted, ethereum has its own fees. The less popular chains tend to have lower fees.

devname 6y ago
Less popular? Bitcoin Cash BCH is handling more transactions than BTC, with insignificant fees.