Over the past year, we have seen the fee market for bitcoin transactions evolve at a rapid pace. As transaction volume continues to increase, so does the demand for block space, which remains in limited supply of 1 megabyte (MB) approximately every 10 minutes.
As we have debated the issue of increasing the supply of block space ad nauseum, this article will focus on the history and current state of bitcoin transaction fees.
The fact is that the pressures resulting from high contention for block space have degraded user experience and thus incentivized bitcoin wallets to make adjustments in order to keep their users happy by ensuring timely confirmation of transactions.
However, we’re a long way from operating an optimal fee market.
The History of Transaction Fees
For the first several years of bitcoin’s existence, transaction fees were optional – they were considered a donation to miners.
Bitcoin Core’s default fee changed several times over the years as the bitcoin exchange