Bitcoin transfer fees have remained low since July 2021, despite a recent spike in the currency’s value. An Arcane research analysis states that transaction prices have remained low since July 2021.
Last week, transaction costs did see a slight increase. Clustering of the Mempool increased the average transaction fees per day. Over the last seven days, the total transaction fees increased to $691,000. This price doubled since last Tuesday.
Although transaction costs have doubled, the increase is negligible since transaction fees are still in a modest range. In addition, it took two days for miners to process all of the Mempool transactions. This was done to protect the network while keeping the transaction fees low.
Moving on, a significant increase in Segwit transactions on-chain occurred in June 2021. The percentage rate rose from about 50% to 70%. Currently, this percentage has increased to be above 80%. Accordingly, this should result in an increase in transaction throughput for the network. In addition, during the year 2021, an increasing number of exchanges used Segwit addresses.
Factors Indicating Low Transactions Fees
According to Eric Yakes, the author of the Bitcoin book ‘the 7th Property’, there are three key reasons for the low transaction costs in Bitcoin. These main reasons are:
- Segwit acceptance
- Hash rate redistribution
- The implementation of Bitcoin layer 2 infrastructure
Following the China ban and transfer of hash rate, Yakes claims that network difficulty has bottomed and has now increased to ATHs. The increase of Segwit transactions is also a factor. In his statement, Yakes notes that this recovery in hash rate can discover blocks faster than the difficulty adjustment can keep up with. This results in faster clearance of transactions, lowering transaction prices.
On the other hand, Yakes emphasizes that transaction costs should not be anticipated to stay constant. According to him, it is crucial when the price, hash rate, and transaction difficulty all get to equilibrium. As a result, the fees market will become less competitive, and transaction costs will rise.
Tomer Strolight Comments on This Occurrence
Furthermore, Tomer Strolight, editor-in-chief of Swan Bitcoin, says there is another reason why transaction costs are so cheap. In addition, Strolight notes that the top exchanges are now all batching trades together. Instead of the awful practice of sending out each withdrawal as a distinct one, they are sending out 100 or more in a single transaction.
Using channels when the blockchain isn’t crowded is a good way to keep the chain from getting blocked. Likewise, using them repeatedly keeps the chain from crowding when lightning transactions are faster and cheaper. Likewise, the Arcane study found it is probable that a lower number of transactions per day is the factor that results in a lower average transaction price.
As Yakes notes, transaction costs might rise in the near term. However, there are so many factors working against increased transaction fees. Meanwhile, Tromer is optimistic too. He adds that they can progressively expand network capacity to support global trade without blockchain becoming a barrier. In the general analysis, the protocol continues to grow, making network transactions more economical.