Transaction fees have always been a bit of trouble for bitcoin. This has been one of the major barriers in preventing a lot of investors from jumping on the bitcoin bandwagon as investors have to shell out very high fees on every bitcoin transaction that they process.
However things are improving in this regard as well as recent reports suggest that the median transaction fee for bitcoin has been the lowest it has ever been since 2011.
For the last three months, the median fee rate for bitcoin reached its lowest on April 4 and 5. The rate was set at 6.86 satoshi/bytes (sat/B) and this momentarily went up by to 39.29 for a day on April 30. It has since dropped down to under 10 satoshis, with the lowest being 8.86.
This is a big change from the start of the year. At the beginning of 2018, the fee rate was at 453.57 sat/B. The lower rate indicates that bitcoin is now cheaper to transfer from different wallets. This is a good thing for bitcoin as a whole because the high costs and the long transaction times were the reason for the biggest fork in bitcoin’s history: bitcoin cash (BCH).
When Bitcoin Cash was launched it promised investors two things. One was faster transactions and the second was cheaper transactions. Initially, the gap between bitcoin and bitcoin cash was great and there was a noticeable advantage in dealing with bitcoin cash.
That gap has closed significantly in recent months as bitcoin has caught up with the fees offered by bitcoin cash. Initially, the fee rate for bitcoin was $34.095, compared to bitcoin cash’s $0.0333. The latest update now shows that bitcoin fee is now around $0.113 for its transaction fee compared to the $0.0038 fee charged for bitcoin cash.
Bitcoin Fees To Get Lower In Coming Months
The main reason for this is bitcoin’s soft fork that added Segregated Witness (SegWit). Though there has been some hesitancy in adopting it, the network now has 38% of all transactions using the protocol to process the transfers. SegWit’s transactions are a lot cheaper. This is noticeable in the fact that 18% of the total transaction costs are from SegWit transactions – this is despite the fact that it already handles 38% of the total transactions.
The transaction fees are expected to go a lot lower, especially with the further adoption of both SegWit and the Lightening Network (LN). The Lightening Network will further reduce transaction fees and also speed up processing times. However, LN is still in development and was able to handle $150,000 worth of transactions in April, while near-instant transactions have been made possible.
