Bitcoin has suffered criticisms for having high transaction fees, but that may be changing. Despite price volatility, Bitcoin transaction fees in terms of sats/vbyte have just hit a decade low going by newly disclosed data.
Galaxy Digital’s researcher explains Bitcoin’s reducing transaction fees
According to a report by Galaxy Digital’s head of firmwide research, Alex Thorn, the 2021 Bitcoin market bull run was the first time a significant price surge was not accompanied by a spike in transaction fees.
Thorn attributes the anomaly, which became apparent in June 2021, to several factors coming into play during the year that made the Bitcoin blockchain more efficient. These include increased adoption of the Bitcoin Segregated Witness (SegWit) softfork, a jump in the proportion of batched transactions, and a spike in usage of the Lightning Network.
A shift in the behavior of users also contributed to the fee reduction. Thorn noted that there was a sharp decline in Tether and other OP_RETURN transactions on the Bitcoin network, and reduced miner selling.
The implication of the development is a bullish one. This is because the factors that contributed to it go to show that Bitcoin Bitcoin can successfully scale without becoming bloated by a block size increase. However, the fees may not always remain so low, the analyst opined.
While fees will not always remain this low, the success of scaling Bitcoin via transaction compression and efficiency gains rather than block space expansion is a major achievement for developers allied with the ‘small blocker’ faction in The Block Size Wars,” he said.
Some analysts consider the trend long-term bearish for Bitcoin
Not every observer agrees with the analysis. The Galaxy Digital head of research noted these opposing views that have been raised saying:
But some analysts worry that high fees will be required in the future to compensate miners for securing the network as the block subsidy continues halving and eventually disappears.
He added that if this plays out to be the case, the current low-fee environment should be considered to be a short-term benefit but long-term risk.
Meanwhile, other blockchains like Ethereum have also been recording remarkable trends in transaction fees. Data shows that while the Ethereum blockchain generated over $10 billion in transaction fees in the last 365 days, there has been a trend of reducing returns to miners.
At present, Bitcoin has continued to trade with a lot of volatility. On the day, Bitcoin is down 4.62% and is trading at around $44,800.