Bitcoin blocks experienced up to 95 percent congestion this month, but it didn’t impact its transaction fees, which remain at around $0.1
Cryptocurrency analyst Willy Woo published a graph to demonstrate a stark comparison between BTC transaction fees in two separate congestion episodes. The first case was from 2017, the year that witnessed Bitcoin congestion topping up to 85 percent and its fees peaking to as high as $25 per transaction. The other is from the present when the average Bitcoin transaction fee is close to $0.10 per transaction regardless of the all-time high congestion rate.
Unlike a centralized payment settlement network, the Bitcoin network confirms the transactions when its network of nodes – called miners – reaches a consensus to mine a block. Each block can cater to more than 500-transactions on average, with its small 1 MB size limit. As the BTC volume goes up, the speed of a BTC transaction goes down, allowing the network to raise fees to confirm transactions faster by providing more hashpower. It is the very reason why – in 2017 – the transaction fees jumped to its all-time high upon an increase in congestion rate.
Segwit and Lightning Network
Bitcoin Core proposed to improve the digital currency’s network scalability issues by implementing a soft fork called Segregated Witness (Segwit). The group of developers would separate signature data, which was the part of the original Bitcoin blocks and covered 65 percent of its size-space, and move it to a separate structure in the end, away from the Merkle Tree record of who is receiving or sending bitcoin tokens. The network reached consensus for a soft fork, and SegWit became a reality on August 23, 2017.
Segwit also upgraded the Bitcoin network for solving its malleability issues, which further paved for the launch of the Lightning Network. The solution would aim to be the microtransaction network of Bitcoin, removing small transaction requests from the main blockchain and processing them on off-chain. It would put the record on the main blockchain at the beginning and end of their execution.
The combinative solution of Segwit and Lightning network to Bitcoin reflects in the chart published on Willy Woo twitter account, hinting that the digital currency’s core protocol is improving gradually.
Despite improvements, the original Bitcoin continues to feel the competition from its forked version Bitcoin Cash. Though the latter has lesser investor sentiment, which keeps it slightly behind Bitcoin, the fact that it is processing over 9 million transactions in a day makes it a serious player in the crypto market. The Bitcoin Cash network does not opt for SegWit but instead has increased the block size from 1 MB to 8 MB to process more transactions in lesser time.
Well, I predict once blocks are consistently full again (doesn’t take much) fees will zoom up again. Improvements on that have been minimal.
— Jacob Eliosoff (@JaEsf) October 20, 2018
Miners still feel that Bitcoin Cash has a long way to go, mainly because its value is far lesser than that of BTC. It means that miners would make more profits by mining BTC over Bitcoin Cash against similar investments. Unless the adoption level and value of Bitcoin Cash grows, BTC would likely lead the game of mining.