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Bitcoin transaction fees, which averaged at above $2.5 in May, have fallen significantly over the past few weeks. As the size of the bitcoin mempool, the holding area for unconfirmed transactions, decreased substantially, transaction fee of bitcoin transactions declined.
Bitcoin pioneer and cryptocurrency wallet platform operator Jaxx COO Charlie Shrem recently revealed that he was able to transact $2,000 in bitcoin with a $0.25 fee. The transaction was approved and received its first confirmation within 6 minutes.
Transactions Can be Verified With Less Than $1 Fee Within hours
Still, most transaction fee estimators including 21 Inc’s Bitcoin Fees recommend a transaction fee of around $1.7 for transactions with a median size of 226 bytes. For a 226-byte transaction, a 300 satoshis per byte fee would cost $1.7 but according to Blockchain, the second largest wallet platform behind Coinbase, users can attach a 100 satoshis per byte fee and still have transactions verified within hours.
A 100 satoshis per byte fee for a median-sized bitcoin transaction would cost around $0.6, which is significantly smaller than the average bitcoin transaction fee of $2.5 in mid-may.
Two Potential Reasons Why Bitcoin Transaction Fee Fell
Experts including Blockstream chief strategy officer Samson Mow and Bitcoin Core developer Greg Maxwell have attributed the abrupt decrease or clearance of the bitcoin mempool to the termination of bitcoin transaction spam attacks.
In June, Maxwell revealed that a series of spam attacks that targeted the Bitcoin network last year were filled with transactions with abnormally low transaction fees. According to Maxwell, the majority of spam transactions were designed in a specific way to prevent them from being approved and verified by miners.
“There is no such thing as the ‘full size of the mempool’. During the spam attacks last year I collected several gigabytes of transactions with fee rates so low that they’ll never confirm– assuming they haven’t been conflicted, they’d still be valid now,” said Maxwell.
In the past two months, the size of the bitcoin mempool declined by 94 percent, from 100 megabytes to 6 megabytes. Which means, the number of unconfirmed transactions within the bitcoin network decreased by 94 percent, clearing the mempool and ultimately, lowering the average block size to 0.97 megabytes to 0.79 megabytes.
However, some analysts have also claimed that users may have left bitcoin and started to use other cryptocurrencies such as Litecoin and Ethereum Classic to transact smaller amounts and transactions. Since Litecoin is structured like bitcoin and Ethereum Classic recently adopted a monetary policy that is similar to bitcoin, both cryptocurrencies can be used to transact small amounts of money with significantly lower fees.
What Happens Next?
If the recent decline in the size of the bitcoin mempool was caused by the first factor, the termination of spam attacks, then it paves a positive path for bitcoin scaling. The termination of spam attacks can be understood as the imminence of Segregated Witness (Segwit) activation and the optimization of bitcoin blocks.
In contrast, if the transaction fee, block size and mempool size declined due to the migration of users from bitcoin to other cryptocurrencies, those users will likely return back to bitcoin once it scales securely, efficiently and proportionally.