The Problem with Bitcoin Transaction Costs: Bitcoin NFTs and Congestion

Bitcoin (BTC) has extremely high transaction costs. In fact, the fees are so high that the world’s largest crypto exchange Binance had to temporarily suspend BTC withdrawals. What’s going on here, and is it a problem?

Bitcoin NFTs are causing congestion

The average bitcoin transaction costs amounts currently $19.21. That is a huge increase of 800% compared to a year ago. This sudden increase has everything to do with Ordinals, the technology that makes it possible non-fungible tokens (NFT’s) on the Bitcoin blockchain.

This ensures that there is virtually no space left in transaction blocks. Due to the limited space, users increasingly offer more money to ensure that their transaction is taken and processed. As a result, transaction costs are now rising explosively.

Due to the high transaction costs, Binance was forced to temporarily suspend BTC withdrawals last night. “A large number of withdrawal transactions are still pending as our established transaction balances were not set up for the recent $BTC network transaction fee increase,” Binance said in a statement. tweet.

Binance has now increased the transaction fees in its system, which means that more transactions are included by miners. The recordings are therefore open again. In addition, the exchange indicates that it will implement the Bitcoin Lightning Network.

Is this a big problem for Bitcoin?

The congestion sounds like a significant problem for Bitcoin. The network was originally intended for making smaller payments. It is not ideal when you have to pay such transaction costs for your cup of coffee.

Yet there are also positive sounds. The high transaction costs also ensure that BTC miners earn more money, which in turn has a positive effect on the security of Bitcoin; the more miners, the more secure the network. The income that miners received from transaction costs was even at a certain point higher than the income block rewards. This only happened a few times in the past.

The Bitcoin Lightning Network can offer a solution here. The scaling solution makes it possible to process small transactions outside the blockchain. This is a lot faster and for a fraction of the price. Either way, it’s a big issue for the Bitcoin community that has divided opinion.