Last week, was probably a dream week for every Crypto enthusiast. After the most prolonged correction ever in the history of Bitcoin, the world’s largest cryptocurrency finally pumped by a significant amount, recording a two-digit gain over 24 hours. However, while the whole cryptocurrency world was speculating about a mystery buyer or group of buyers who pumped the currency by spending 100 Million USD, another crucial issue probably went unnoticed, the skyrocketed Bitcoin Transaction fees.
During the surge, the Bitcoin Mempool spiked considerably, which in turn raised the transaction fee. However, there wasn’t any significant damage done to the scalability of the Bitcoin network, as the Bitcoin volume subsided within a few hours. The Bitcoin transaction fee table and the price history table of Bitcoin for last week can explain this rise.
Analysing these tables, one can easily see that $4096.9 on April 1st is the lowest price for one Bitcoin for the period and the price on April 3rd which is $5307 is the highest. This increase in value was substantial amounting to 30%, in just two days. However, if you look at the transaction fee during this period, it is a whole different story.
On April 1st, the transaction fee average to complete a transaction was between $0.40 and $0.49. The transaction fees depend on how fast you want to get the first confirmation: more the transaction fees, higher the chance that your transaction gets mined in the subsequent block. But this average got skyrocketed due to the spike in Mempool during the said period. And on 6th April the transaction fee was between $1.92 and $2.02. Even though it is a given that a price rise will increase the transaction fee, however, an increase of 30% in price has increased the fees by 400%. This increase makes it evident that the rise of Bitcoin breaking the resistance at $6200 itself can set the fees soaring.
Interestingly, the date at which Bitcoin registered its highest price is not the date at which its transaction fee is the highest. The influence of the spike in Bitcoin Mempool is the culprit here. On April 2nd the price rise, generating a renewed interest in the cryptocurrency which sends the volume sky high and soon the network nearly clogs. This factually proves that a stagnant price alone can’t put a check to the increasing transaction fees.
This scalability issue of Bitcoin is the prime reason that hinders its mainstream adoption. Imagine waiting 10 minutes for your Coffee payment to go through, this makes the practical use of Bitcoin as a currency, impossible. Another counter-argument usually placed against this is the evolution of Bitcoin as an asset rather than a currency. But as a speculative asset Bitcoin has had its glory days during the winter of 2017 to go back, or beyond that point, it needs something more than just speculation. Hence ideally for Bitcoin to rise to those glory days in terms of price, it has to address this issue of scalability. There are currently two possible solutions:
Increasing the Block Size of Bitcoin
This solution had split the Bitcoin community into two. The much-hyped fork of Bitcoin Cash during 2017 was the byproduct of this disagreement. The current block size of 1MB has always been a point of debate among the Bitcoin community. And if you delve into the history of Bitcoin, you can see multiple instances where programmers suggested the increase of Bitcoin’s block size. However, this argument has greater importance now than ever. Even though SegWit(Segregated Witness) and Lightning Network were introduced to solve the scalability issues, those have not found the desired success still.
Hence, the most recommended change to improve Bitcoin’s scalability is to considerably increase the block size of Bitcoin Network, so that more transactions can be included in a single block, effectively reducing the scalability issues.
A More Scalable Coin Replacing Bitcoin
This solution might sound a very distant possibility as most of the Crypto enthusiasts still think that Bitcoin will be the face of Cryptocurrency for long. However, scalability issues seem to make a different point. There are several coins which are touted as the next Bitcoin and seeing the way the Bitcoin network has behaved through the latest surge, the possibility of another coin emerging to replace Bitcoin is not a distant solution anymore.
Hence, we can safely assume that whether or not Bitcoin’s price goes to the moon, with the existing issues in the network, the transaction fees will surely go to the moon.