As the price of Bitcoin has increased since the start of the year, transaction fees have remained surprisingly low. Median transaction fees are hovering around $0.15 with Bitcoin over $10,000, as opposed to the 2017/18 bull run where fees were often above $1.
While low transaction fees are good news for traders and investors, they also hold out deeper network insights. Low fees are a strong leading indicator that Bitcoin is scaling well, in spite of fears to the contrary.
On the Scale
The problem of scaling—how to get more transactions per second into the Bitcoin network—has caused dramatic controversy among Bitcoiners.
The issue is simple. For adoption to take off, the network must process more transactions. However, since founder Satoshi Nakamoto placed a 1 MB hard limit on block size in 2010, transaction volume has felt locked.
This fixed block size has led to suggestions that Bitcoin can’t scale. If scaling proves impossible, the network is doomed to obscurity as other chains take over the market.
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Solutions have been offered in abundance. The controversy has even spun off a couple of new hard fork cryptocurrencies. But a correct answer remains elusive.
Nevertheless, as the market has buoyed, and attention and transaction numbers have increased, fees have remained low. This is evidence that, despite small block sizes, Bitcoin is scaling.
Several causes have been identified. SegWit adoption has grown substantially, for example. SegWit, short for Segregated Witness, is a soft fork of the Bitcoin chain which increases the overall transaction numbers per block. An increase in Lightning Network usage has played a role as well.
The Future is Now?
As the network scales, the potential for greater adoption becomes a reality. With Visa processing 2000 transactions per second compared to Bitcoin’s seven, global adoption will require scaling solutions.
While much work remains, transaction fee stability lends crucial evidence to the network finding ways to scale. As this process continues, the potential for Bitcoin to be a globally adopted payment methodology could become a reality. We already have the English Premier League embracing cryptocurrency. Why can’t that love expand further?
Do you think Bitcoin will scale appropriately or are the naysayers right, and Bitcoin is doomed to obscurity? Let us know your thoughts in the comments below!