Tl;dr: Bitcoin network fees have skyrocketed in the last week! In this post we’ll discuss the reasons behind these soaring fees, how they have been addressed in the past, and what you can do to navigate the current congestion.
Bitcoin Transaction Fees: A Primer
Let’s understand why transaction fees are soaring. When supply of something is fixed, increased demand will lead to increased prices. As Bitcoin’s block size is limited (a block is generated every 10 minutes on average), when demand for transactions increases, the fees will naturally increase. The current heightened demand is primarily driven by Ordinals and BRC-20 tokens, which are based on Ordinals.
1/ #Bitcoin fees FAQ 🧵:
What is happening with BTC transaction fees?
When supply is limited (Bitcoin block size is limited –> Tx number is limited, block is generated every 10 mins on average) and demand is higher, economy tells us the price will rise. pic.twitter.com/AJeACPu3JC
— Tal Be'ery (@TalBeerySec) May 8, 2023
Has it happened before?
This situation is not unprecedented. In the past, Bitcoin and Ethereum have experienced similar periods of high congestion. However, these periods eventually subsided as the hype cooled off, people learned to wait longer, and activities that didn’t require high fees moved to lower-fee networks.
Let’s explore some short-term and long-term solutions that have been used in the past to address these issues:
- Short-term: Cool off the fee market. In the past, high congestion periods have naturally cooled off. Users adapted by waiting longer for transactions to clear, and some activities moved to networks with lower fees.
- Long-term: Scaling solutions. In response to previous congestion events, developers have introduced scaling solutions both within the blockchain (e.g., SegWit in Bitcoin, EIP-1559 in Ethereum) and outside of it through Layer 2 solutions (e.g., Polygon, Lightning Network).
What does the future hold?
It’s likely that similar solutions will be implemented in response to the current congestion. However, it’s impossible to predict exactly when these improvements will occur.
What can I do right now?
In the meantime, here are some suggestions for dealing with the high congestion right now:
- Wait it out. If your transaction isn’t time-sensitive, consider waiting for the congestion to subside. As history has shown, these periods of high fees don’t last forever.
- Use alternative networks. You can temporarily move your activities to another blockchain, such as Polygon, which offers lower fees. This is a viable option for users who don’t necessarily need to be on the high-fee Bitcoin network.
- Speed up transactions with external services. If you’re in a hurry and don’t mind paying a premium, you can use external services to speed up your transaction. These services are designed to help users navigate the congestion by paying higher fees on their behalf to ensure faster processing.
The current high congestion and soaring Bitcoin transaction fees are not unprecedented. Past events have led to the implementation of short-term and long-term solutions, and we can expect a similar outcome this time. Until then, consider waiting for the congestion to subside, using alternative networks like Polygon, or speeding up your transactions with external services.