Bitcoin’s backlog has fallen to just 6,000 transactions at the time of writing, considerably lower than the highs of 300,000 we saw in recent weeks.
Fees, however, still remain at a relatively high of around $2 per next block transaction, and at around 50 cent for slightly slower confirmation times.
With the reason for it somewhat unclear, but it might perhaps be inertia whereby exchanges or wallets are still operating on older fixed fees, or miners might perhaps be actually reducing capacity through producing blocks that contain as little as 47kb of data as Antpool did, or 117kb as SlushPool did:
But general capacity, as far as blockdata is concerned, does not appear to have changed much. However, block frequency does seem to have changed.
When we looked at previous blocks found for this article, there are a number of instances where nine or ten blocks are found within an hour, as opposed to the average of six, and such instances do appear to be occurring somewhat frequently.
Network hash-power, therefore, has clearly increased, while difficulty has not yet changed. In combination, that has the effect of increasing capacity temporarily as blocks are found more often.
On the demand side, transaction numbers have fallen too. They are operating now for much of February at a level the network first reached in 2016.
This drastic reduction of an, in effect, halving in demand, is mirrored by ethereum which doesn’t usually operate with a backlog.
There, we can more clearly see a mirroring of the price in line with Metcalfe’s law of network effects, which correlates with crypto-market value:
The differences here of course is that ethereum has gone down from around 1.4 million to now around 900,000, which still stands far above transaction levels it saw prior to December 2017.
While bitcoin has gone down from a brief high of 500,000 with a huge backlog, to now 190,000 with almost no backlog, a level it first started reaching two years ago.
Equivalizing that to ethereum would mean a transaction level of around 200,000, rather than some four times higher at 900,000.
As such, and based on these numbers, it does appear more than just price related demand has exited the bitcoin network, making current demand behavior a structural change. While for ethereum it does appear to be just cyclical.
But we’ll have to wait and see how this progresses further for the bitcoin network to better determine whether the so called “fee market” makes any sense in a free market.