As Bitcoin gains popularity and moves to mainstream adoption, more and more people are using the Bitcoin network. This massive increase in usage is partly responsible for why the price of bitcoin has been increasing. However, it’s not just the bitcoin price that has been climbing — transaction fees have also skyrocketed.
Also see: How Will We Get to 21 Million Bitcoins?
Can Bitcoin Scale, and Keep Cheap Fees?
One of the key challenges that Bitcoin has been facing throughout its history is how it may be able to scale, and grow large enough to become a true competitor to already established payment platforms such as those provided by banks and credit cards. This scaling debate sparked the historic “Bitcoin scaling war” which lasted over two years and ended with the activation of Segregated Witness, a proposed solution to the scaling problem.
In this video, Bitsonline‘s George Levy describes the reasons why we have gotten to this stage, and the underlying causes for the dramatic rise in Bitcoin transaction fees.
As you’ll see in the video, while SegWit has indeed been activated, and while many transactions are using the new technology, it seems that SegWit being activated did not have the intended consequences and major impact it was expected to have on increasing transaction volume and lowering fees. At least, not until third-party services move to fully accommodate its changes.
Instead, the Bitcoin network is currently struggling under the weight of a massive backlog of unconfirmed transactions that are trying to make their way to being added to a new block and getting eventually confirmed.
In the process, we review how Bitcoin used to be better than Western Union in terms of fulfilling the promise of transferring money over the Internet, and we explore how this initial vision for Bitcoin has lost its way.
View the full story in this video, along with examples showing exactly the various elements behind the scenes that are driving this astronomical rise in the price of Bitcoin transaction fees.
Images via George Levy, Bitsonline