The development of scaling solutions, along with a decrease in Bitcoin transaction throughput, has allowed for Bitcoin fees to drop under a dollar. A Bitcoin ‘whale’ utilized these dropping fees, moving 48,000 Bitcoin for just four cents.
$290 Million Transaction for Four Cents, Where Else Can You Do That?
Bitcoin fees were the talk of the town in December 2017, as Bitcoin fees briefly reached $50 when the network confirmed nearly 400,000 transactions each day. Since then confirmed transactions have halved, dropping to an average of 200,000 transactions on a daily basis.
This decrease in transactions has allowed for Bitcoin’s mempool to clear, as the network became clogged with transactions in the latter half of 2017. According to info aggregated by popular cryptocurrency infrastructure firm, Blockchain, the number of transactions waiting for confirmation has dropped by over 95%, from an average of 100,000 to 5,000.
It was widely speculated that Bitcoin’s critics, hell-bent on ruining Bitcoin’s credibility and reliability, purposely inflated Bitcoin transaction fees. These critics reportedly filled up Bitcoin blocks with ‘spam’ transactions, using the Bitcoin network for no real purpose.
However, others observed that the exponential increase in transaction fees was also due to the growth in the interest of Bitcoin, with retail consumers looking to transact value using the ‘flavor of the month.’
A whale, unidentified at the time of writing, has proved this point, paying four cents of fees for the transaction of over $290 million worth of Bitcoin. The transaction occurred late last night, with the Bitcoin user moving 48,500 Bitcoin for mere pennies, a far cry from the fees of late 2017. The ‘Whale’ paid 0.00000675 Bitcoin in fees, offering a rate of 3 satoshis per byte of transactional data.
It came as a surprise to some that a user with such a large amount of cryptocurrency holdings would pay fees well-below the rate suggested by Blockchain, at around 5 satoshis per byte.
A Twitter user, with the handle, @martybent, said:
“Can you imagine trying to move $300M for $0.04 using the traditional banking system? No, no you can’t.”
However, users have sought for more, looking for ways to decrease transaction fees to the bare minimum, while increasing Bitcoin transaction throughput limits. This search has signaled the development of Bitcoin scaling solutions, pertinent to the future success of this world-changing network.
Scaling Solutions: Segwit and the Lightning Network
For the uninitiated, Segwit is an improvement on the Bitcoin network that changes the transaction format of BTC transactions. Segwit allows for transaction sizes to be reduced drastically, helping to reduce fees, along with allowing for an increased amount of transactions to be stored within one block.
This protocol, activated in August 2017, has already caught on with the network, as over 36% of all transactions now run on Segwit addresses.
The implementation of the Segwit protocol was vital in making sure that the Lightning Network, another popular scaling solution, could function. The Lightning Network is an off-chain scaling solution that promotes the use of Bitcoin for micro-payments. This specific scaling solution utilizes balance sheets, payment channels, and multi-sig addresses to ensure that all parties get the money they deserve. By using this system, thousands of transactions could be made per second for minimal fees, the holy grail for any cryptocurrency network.
Blockstream, leading cryptocurrency infrastructure and development company, recently announced that Lightning Network adoption has grown at a staggering rate, saying:
“Around the announcement of the Blockstream Store, the Lightning Network had a total of 46 open channels and 0.682 BTC in capacity. Today, there are roughly 7,800 open channels with 26 BTC of capacity. That is a 16,856% increase in channels and a 4,084% increase in channel capacity in 6 months!”
Hopefully, the adoption of scaling solutions can continue, as Bitcoin begins to seep into traditional financial systems, finding a place in daily commerce.
Featured image from Shutterstock.