Bitcoin Not Facing “Nightmare” Issue, But Higher Transaction Fees
Bitcoin may not really be facing an issue as the media has projected, but the users of the digital currency may end up paying more than the average fee payable and also wait for a longer time to get confirmation on transactions because of a disruptive network user whose identity is not yet known. However, the incident has sparked off a debate as to why the network is experiencing increased transaction load amid discussions related to scaling up the Bitcoin network.
The issue, referred to as “block size debate,” has actually divided the Bitcoin Community into two groups. One group is called Bitcoin Core. This group is formed by the volunteer developer community. The group’s goal is to implement a different method of storing signatures latest by April this year in order to increase the capacity of the network. The other group, Bitcoin Classic, has a team of enthusiasts and developers who have launched competing application software that is capable of quickly executing an update to the 1 MB cap on transactions. This group believes that the cap is an impediment as far as user adoption is concerned.
The issue associated with Bitcoin network is that an additional cost or fee gets attached when a user executes a Bitcoin transaction. The fee is taken for effectively securing the transaction in the blockchain. In effect, the fee associated with a Bitcoin transaction serves as a means for the users to bid and include the transaction in the block. The cost rises or falls in tandem with the demand for space.
This can be attributed to the fact that some Bitcoin wallets that are in use currently charge a hard-coded fee of 0.0001 BTC, which is approximately 4 cents. The priority of a transaction is decided on the basis of fees paid as Bitcoin miners bundle them into the blockchain. The higher the fee the miner pays, the higher will be the priority for a transaction.
Signs show that the fee that is being charged currently for Bitcoin transactions may not be sufficient at all. This in turn is affecting the performance of Bitcoin wallets that continue to charge the standard fees. As a result, the transactions that have been charged only the standard fees remain unprocessed. This is putting a great deal of pressure on businesses as well as individual users.
It has been noticed that services such as Bitex.la, the South American Bitcoin exchange, and BitQuick, the peer-to-peer platform for trading Bitcoins, are forced to pay more fees for the transactions and observers point out to this as the “scenario” for the Bitcoin network.
According to Manu Beaudroit, chief marketing officer at Bitex, not only is the exchange is shelling out more fees, but also has to wait for longer periods of time as the system is taking more time to deliver the transactions. He also noted that it is taking up to 24 hours to deliver a deposit transaction and that the exchange ends up paying a fee that is five times more than the standard fee.
Data released by 21.co reveals that users who pay the standard fee charged by the wallet (10 satoshis/ byte) are often made to wait for the completion of as many as five to 67 blocks for transactions to receive the confirmation. According to estimates, this process could take about 13 hours. If a transaction has to be completed faster, then 21.co recommends that users pay a fee of 0.0023 BTC (approximately 97 cents), which is 2,200 percent more than the default fee.
Disruption of Service
According to Bitcoin wallet providers, the current issues, arising out of a shortage in block capacity, have a specific nature. Observers noted that the problems are being experienced mostly by hosted wallets. Both Ledger and BitGo offer wallets with dynamic fee option based on the increase in transaction capacity demand, have not been impacted by the issue related to the current spam attack.
Over the years, the Bitcoin network has experienced many spam attacks. However, the current problems seem to be of a different nature as it is leaving users who pay hard-coded fees at a disadvantage.
Transaction Backlog seems to be Easing
Network data noted that the congestion problem seems to be easing out as network users have started paying higher fees. However, the current issues raise the question as to whether the wallet software should be changed to enable dynamic fee adjustments.