Bitcoin’s miner fees have reached a new high today of 0.00162720 btc for the simplest of transactions, translating to $30 for just 226 bytes of data.
With the lowest denominator for data, just one byte, now costing 720 satoshis, or 12 cent, not far off from as much as an entire ethereum transaction would cost, and magnitudes more than what a bch transaction costs.
The spike in fees is due to a considerable increase in demand for transactions with the network operating at 37 transactions per second, far higher than the 3 tx/s it can handle due to a hard limit of 1MB of data for every 10 minutes.
A hard limit which was meant to be slightly increased by segregated witnesses (segwit), but that appears to have little effect, with the network as congested as ever.
This situation has led to a reverse merchants adoption for bitcoin, with Steam the biggest merchant to recently announced they no longer accept bitcoin payments.
Placing significant pressure on BitPay, bitcoin’s biggest payments processor, which recently announced they were to add another digital currency, Bitcoin Cash, in addition to bitcoin, for the first time ever since it was founded in 2011.
Bitcoin Cash has around eight times bitcoin’s capacity, with fees at pennies or less, the network so planning to increase capacity on chain in line with demand.
How far that approach can go remains to be seen, but they are probably waiting for the deployment of two longer term solutions, the Lightning Network (LN) and sharding.
LN has been promised for years, with a running joke now being that it is just 18 months away for the past three years. Once it is deployed, however, and if it works fine, it is probable BCH will incorporate it as its supporters do not seem to be against second layers in addition to on-chain scaling.
On that latter part it is only Vitalik Buterin, ethereum’s inventor, and his team working on it as far as we are aware, laying out a roadmap to Visa levels scaling through sharding.
Its deployment would probably be the biggest achievement since bitcoin’s invention in 2009, and if it works it is likely all the rest will copy it, including potentially btc itself.
Until then, however, bch and eth are trying to keep the network smoothly running by increasing the blocksize as needed in line with demand while they wait for the deployment of full solutions.
While bitcoin has taken the opposite approach, limiting capacity fully even while there are no alternatives at this stage but to pay sums that are uncompetitive now even with that ancient Western Union.
That approach is intentional, with Gregory Maxwell, Blockstream’s CTO and a Bitcoin Core developer stating:
“The fact that the mempool frequently runs empty is a serious issue not the other way around. If the mempool doesn’t overflow the minimum relay fee says stuck at 1s per vsize, which is a somewhat degenerate case.”
As such, bitcoin developers see low fees as degenerate, while high fees as seemingly desirable so that capacity is always full, with previously unthinkable fees of $30 now a daily reality.