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Expect Bitcoin Fees to Continue Rising

May 17, 2016 at 9:41 by Andriy Moraru

If you have been conducting Bitcoin transactions with any frequency since last summer, then you may have noticed the consistently rising transaction fees — almost triple since last summer, according to the Bitmain bitcoin fee estimator. At the current transaction size of 500 bytes and rate of 100 million satoshi to a bitcoin, the base transaction fee for moving Bitcoins stands at $0.15. Some of the more established service providers are charging a premium above this base rate; for example, OKCoin now stands at $0.23 per transaction.

Why are fees rising?

The primary reason for transaction fees increasing is the capacity cap on Bitcoin movement, a move that is pricing out many companies who would have Big Bounce House otherwise used the Bitcoin blockchain to identify individual transactions. Businesses that would otherwise gain an advantage from moving Bitcoin now find themselves back into traditional currencies. Leaders in the currency do not see an immediate solution, and none of the big boys are making any moves to reverse the trend. For the time being, rising fees seem to be the inevitable norm.

The Response

Some of the more technically proficient and aggressive companies using Bitcoin have responded to the rising fees by building their own private blockchains. Although this will not relieve the fee schedule in the short term, the increased competition in recording transactions is sure to cultivate lower fees in the future, says Peter Smith, CEO of Blockchain.info. However, Smith does not consider this response a good thing necessarily — this is the same industry tastemaker who decried the lack of singular vision he observed at the Satoshi Roundtable this year.

Reduced service delivery

Service time across the blockchain took longer even as fees increased, meaning that Bitcoin users basically paid more money for far less value. The top support issue reported at Blockchain.info, Coinbase.com and many other leading sites is the transaction time. As network activity is expected to increase over the summer, the trend towards even slower transaction times seems inevitable. Surprisingly, no one attributes the slower reaction time to spam or malicious network attacks, and most of the increased activity seems to be the same type of transaction: the movement of funds from wallets to exchanges. This is possibly an indication of a huge sell-off that may occur during the summer.

Your next move

Transaction volume and fees are one thing — the type of transaction and trust in the top storage entities is quite another. Keep an eye on the reasons that people are creating more transactions and if the sites have any answer to the movement. If they remain stuck, then you may want to look into restructuring your position over the next mid-term period until a viable solution can be produced for the current problem of higher fees and lower service across the network.

If you have any questions and comments on the commodities today, use the form below to reply.

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