While reading yesterday's edition of The Daily Leo by @bitcoinflood, I came across the news about BTC transaction fees pumping. The rising popularity of the Ordinals protocol & BRC-20 tokens has caused an increase in the demand for block space. Some users are all for it, while others are calling it an attack against the network. But what's all the fuss about?
Bitcoin NFTs & BRC-20 Tokens
The Ordinals Protocol has made NFTs a reality on Bitcoin Network. Another use case, wow! Essentially, it's a system for numbering satoshis, the smallest unit of Bitcoin. By giving each satoshi a unique serial number and tracking them across transactions, Ordinals allows users to make individual satoshis truly unique.
BRC-20 tokens are just like ERC-20 but for Bitcoin Network. The total market cap of such tokens is already reaching $1 billion in a few weeks so you can imagine how many trades have happened to reach that point. And guess what, most of them are meme tokens like $PEPE, $MEME & whatnot among 14k others.
Why Fees Are High?
409,931 transactions are pending in the Bitcoin mempool. This means that more people are competing to get their transactions included in the next block. And as we all know, there are only a limited number of transactions that can fit in a single block.
The time it takes for a miner to pick up your transaction depends on the fee you attach to your transaction and the current state of congestion of the Bitcoin network. If there is more congestion, you might have to pay an insane amount of fees to get ahead in the line. That's how it works. Such a bummer, I know.
The same thing keeps happening with the Ethereum network when there is hype NFT project getting sold out and everyone seems to want a piece of it like hungry whale sharks. xD Unfortunately, there's not much we can do about it. We can't increase the block size of Bitcoin overnight, and we can't force the miners to include our transactions in the next block. They will always go for profits. That's how it works!
The major effect of this congestion was seen in El Salvador where Chivo Wallet ATMs faced a decline in usage. These amount of high fees have stuck the lightning network as well but it still worked for many without an issue.
Conclusion
Bitcoin network is not fit to handle so many transactions at once. High fees will be an issue forever and people will move to L2 solutions like Lightning or other L1 solutions that are scalable and much faster than bitcoin. We already have them in abundance.
Posted Using LeoFinance Alpha
