The bitcoin network is currently experiencing considerable congestion and delays, with some 57,000 transactions waiting to move while a backlog of 67MB has formed.
With bitcoin processing only 1MB of data every ten minutes, that backlog would take hours to clear even if no new transactions are made at all.
However, the network is currently running above capacity, processing 3.2 transactions per second. The backlogged txs, therefore, might never confirm and may instead, in two-three days, be dropped off the pool, with bitcoiners having to send them again.
The considerable congestion has led to some of the highest fee levels for bitcoin, with the simplest transaction of 226 bytes costing 0.00067800 btc, currently worth $4.93.
Erik Voorhees of Shapeshift claims average bitcoin fees are now at $10, stating:
“We send over 5,000 Bitcoin transactions every day, and we pay between $3-$15 per tx. Roughly $50,000 per day.”
The considerable rise in fee levels coincides with a significant increase in bitcoin’s price recently, which reached a new all-time high of $7,500 yesterday.
Activity, therefore, has likely increased with new users coming to the network. But, due to its very limited capacity, they can’t be accommodated, so fee pressure kicks in.
Segregated Witnesses (Segwit), a protocol upgrade developed by Blockstream for their sidechains and activated in bitcoin this August, was meant to resolve the situation by doubling capacity.
That, however, has not happened. Average blocksize remains at just above 1MB, with bitcoin seeing as good as no capacity increase now nearly three months on since segwit’s activation.
Much of the industry is preparing for an upgrade called segwit2x which would instantly double capacity, but that is facing considerable opposition from Blockstream, so it is not clear at this stage whether it would go through.
If it doesn’t, then these sporadic congestions would become the new norm, with fees spiking and then falling down. That’s with the aim of forming a settlement system where on-chain transactions are reserved for intermediary hubs, with everyone else transacting on more centralized second layers and/or perhaps sidechains.
But whether that would work is unclear as fees have not maintained a stable level, which would be necessary for a settlement network. Instead, fees have been very volatile, rising to $5 one week, then falling to pennies shortly thereafter.