In an effort to provide users with more options new dynamic transaction fees have recently been introduced by BitGo, which is a bitcoin wallet with multi-signature security. The reason behind these new dynamic fees is because of the increase in the volume of bitcoin traffic which has led it taking longer to process transactions. The pricing for the fees will be automatically adjusted based on processing periods that can be predicted and users will be able to choose which price to go for.
According to the BitGo website “Many transactions have taken longer than usual to confirm. As of (this) writing, the number of unconfirmed transactions is now well into the tens of thousands and continues to rise. To the user, this means that important operations such as exchange deposits are being delayed for hours, with no guarantee of confirmation time.”
One example of a surge in transaction fees that the BitGo website noted was an estimated fee of 0.00012502 BTC per kb or $0.03 USD on June 17th 2015 which had doubled in value by the 8th July 2015 to an estimated value of 0.00026823 BTC per kb or $0.07 USD.
The co-founder and chief technical officer of BitGo, Ben Davenport advised “As a response, BitGo has implemented dynamic fee rates on our wallet. The fees will be below standard during times of low bitcoin network congestion and proportionally higher during periods of high congestion. BitGo platform and wallet users will now enjoy the added benefit of having their bitcoin transactions processed in a more expedient and predictable manner. Our initial benchmarks estimate an average confirm time of about 2 blocks (20 minutes) with the enhanced fee estimations.”
When it comes to dealing with the current and potentially growing surge in bitcoin transaction activity there are three things that bitcoin wallets are doing at the moment said Davenport. The first is to just ignore it and hope things settle back to normal at some point. The second is to provide users with a greater degree of control over their fees, although this is just throwing the issue back at the user and the only way this method would work is if users actually knew what the fee should be and in most cases they don’t. The third way is the direction that BitGo has taken and that is to bring in dynamic fees that change based on the congestion conditions on the network. Davenport advised “We think it’s the best path forward – the software ultimately needs to make smart decisions, with some input from the user on the urgency of the transaction.”
He went on to say that a number of other popular markets are already using systems like dynamic pricing or surge pricing so it will be something that consumers on the whole will be used to.
As to whether people will accept a confirmation time of 20 minutes Davenport advised that in practise most people are waiting this long already, if not longer in some cases. He said that it would be likely that BitGo would add the ability for users to specify how urgently they want their transaction to go through as their main platform already has that capability.