Increase in Miner Fee Due to Bitcoin Network Congestion

Bitcoin scalability, block size, transaction delays are the hottest topics currently being discussed by the community at this time. In one of our previous posts, we mentioned about scalability issues plaguing the platform. To reiterate, the number of transactions on the platform have increased to levels beyond the processing capacity of the Bitcoin network. Increased load on Bitcoin network has created backlogs, causing transaction delays.

The transaction backlogs may lead to an indefinite delay in confirming bitcoin transactions as miners have very limited space on the blocks and they can’t add all transactions into it. So, miners tend to give more priority to transactions with higher miner fees as they tend to gain more out of it. At the same time, higher mining fee does not always guarantee faster confirmation.

Bitcoin wallet providers and exchanges are plagued by customer issues related to delayed transaction confirmations. in order to address these issues, they are increasing the miner fee for transactions happening in and out of their platforms. Recently, the CEO and Founder of Bitpay – Stephen Pair mentioned that their CoPay wallet uses a dynamic algorithm to set the optimal miner fee for transactions in order to ensure faster confirmations.

Increasing Miner Fee Reflected in Transaction Fee Hike

Bitpay is not the only Bitcoin platform taking the approach of increasing miner fee to ensure smooth transactions. Indian Bitcoin platforms have started following it as well. Unocoin, one of the leading bitcoin platform recently sent a mail to all its customers announcing changes in miner fees. Unocoin has doubled the miner fee on all transactions to 0.0002 BTC from the earlier 0.0001 BTC. While the platform collects a fixed miner fee of 0.0002 BTC, they will calculate and set the optimal miner fee for each transaction (even if it means they have to pitch in at times).

unocoin mailer

By ensuring the transactions are readily executed, Unocoin is attempting to earn its customer’s goodwill by making their life a lot easier.

ALSO READ ON NEWSBTC: Hard Fork is Not the Way to Scale Bitcoin, says Stephen Pair

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The Bitcoin network has been facing some issues with respect to transactions lately. These issues mainly related to smaller block size and increased transactions led to a backlog in transactions, making transactions take longer than usual to be confirmed on the blockchain.

Bitcoin block-size has been fixed at 1 MB since it became operational. The 1 Mb limit was set in those initial days when the number of bitcoin users was merely a handful. The idea was to increase the block size as and when the network grows. The Bitcoin network, over the past few years, has exhibited phenomenal growth. With increased users, the number of transactions processed by the network also increases, With the block size remaining unchanged at 1 MB, there is not enough space on the blocks for miners to store more transaction data. The rate of block discovery and block capacity is not keeping up with the increase in transactions. All those transactions that are waiting in a queue for their turn to be confirmed are stored temporarily until their turn comes in a memory pool.

The delay in bitcoin payments has become unpredictable. Instead of the transactions getting confirmed in minutes, it is taking hours. Bitcoin users are not used to these delays and they are worried by the recent developments. According to reports, these worries has led to over 100 percent increase in the number of support tickets raised by users with their bitcoin wallet provider or exchanges.

The current block size is gradually making bitcoin transactions less economical. Increased demand for the confirmation of bitcoin payments has led to an increase in the miner fee. Even with higher miner fee, the network congestion has caused sufficient delays for priority transactions (miners give higher priority to transactions with higher miner fee). The Bitcoin community is currently exploring different ways to solve the block size issue and they are divided about whether to create a hard fork and increase the block size to 2 MB or opt for other methods like SegWit which doesn’t require a hard fork. Either way, we should have a solution soon before the Bitcoin network gets into more trouble that it is already in.