Bitcoin transaction fees briefly double, but remain very low

Want to send some Satoshi, or tidy up your Bitcoin (BTC) wallet? It's getting cheaper and cheaper to do so. According to a report from Arcane Research, Bitcoin "transaction fees have been low since July 2021 and show no signs of rising."

However, transaction fees rose slightly last week. As can be seen from a small jump at the tail of the chart, mempool clusters have pushed “average transaction fees over the past seven days to $691,000, double the amount since last Tuesday.”

Still, the doubling of transaction fees is trivial: transaction fees remain in a low range. Miners churned out mempool transactions over the course of two days, keeping transaction fees affordable while keeping the network secure.

Eric Yakes, author of the Bitcoin book "The 7th Property," told Cointelegraph that there are three main reasons why transaction fees are so low: the adoption of Segwit, the redistribution of computing power, and Bitcoin's second-layer infrastructure such as lightning for near-instant payments. The start of the network.

“In June 2021, the percentage of on-chain Segwit transactions has increased substantially, from 50% to 70%, and steadily rising to over 80%, which should fundamentally increase the transaction throughput of the network.”

Cointelegraph reported that during 2021, the number of exchanges using Segwit addresses is increasing.

In July 2021, Yakes explained that after China's ban and redistribution of computing power, "network difficulty bottomed out and has since peaked". Coupled with the rise in the number of Segwit transactions:

“This hashrate rebound, finding blocks to be produced faster than the difficulty adjustment can keep up with, creates faster transaction liquidation than would otherwise be the case, reducing transaction prices.”

However, Yakes mentioned that transaction fees “should not be expected to remain constant. Ultimately, it all depends on price, hashrate and difficulty will find their equilibrium, making the fee market less competitive and increasing transaction costs.”

Tomer Strolight, editor-in-chief of Swan Bitcoin, cites another factor for low transaction fees:

“Our largest exchanges are all batching transactions now. This means they send out 100 or more withdrawals in one transaction, rather than the horrible practice of a few years ago where each withdrawal was sent in a single transaction .”

In addition, thanks to the ability of the Lightning Network, "opening channels when the blockchain is not congested, and then using these channels repeatedly, as long as there are faster and cheaper lightning transactions to choose from, it can prevent the chain from becoming congested."

Arcane’s research note states that while these four factors are important, it is also “likely that the reduction in the number of transactions per day leads to a decrease in average transaction fees.”

In Yakes' view, "transaction fees may increase in the short term, but there are a lot of trends against the increase in transaction fees, and I think in the long run, transaction fees will continue to decrease."

Tromer is also positive:

“I see that we can gradually build network capacity to handle all the commerce in the world without the blockchain becoming an insurmountable bottleneck.”

Here's another bright spot for BTC: the protocol continues to successfully scale, making transacting on the network more affordable.