According to YCharts data, The average transaction fee of Bitcoin (BTC) dropped from $4.40 this year to $1.80, a decrease of 57.97%. This rise may be due to a variety of factors.
One explanation is that the rapid expansion of the Bitcoin Lightning Network may be a catalyst in which transactions are separated from the blockchain.
From a perspective, the Bitcoin network charges a fee for each transaction. The money is then distributed among the miners. When the network is congested and the demand for transaction processing far exceeds the supply of miners, users tend to pay higher fees.
On April 21, the average transaction fee of the Bitcoin network reached a record high of $62.8 per transaction, because when the demand for Bitcoin was strong, the shutdown of Chinese mining machines slowed down block production.
The cost reduction may be due to Bitcoin miners becoming less skeptical and not losing interest in processing transactions. When this happens, the difficulty of mining, which measures the difficulty of verifying Bitcoin transactions, will drop.
Another possible reason for the decline in transaction costs is the unblocking of the memory pool, that is, collecting all pending transactions before confirmation. When a transaction is sent to the Bitcoin network, it will remain in the memory pool until it receives a confirmation. Since each BTC block has a specific size of 1MB, a large memory pool may encourage miners to favor more profitable transactions.
In these cases, customers started to pay more to prevent their transactions from getting stuck in the memory pool. This increases the overall transaction cost of the Bitcoin network.
As shown in the figure below, the size of the Bitcoin memory pool is much lower than its maximum capacity.
In recent months, the average number of transactions has also dropped significantly. At the beginning of 2021, there were an average of more than 350,000 transactions per day, but now that number has dropped to 250,000 to 213,000 transactions per day.
Another possible explanation for the decline in transaction costs is that Bitcoin traders and holders tend to use less BTC. Declining demand leads to a decrease in the cost of each token, thereby reducing transaction fees.
At the same time, Ethereum fees are also Plummet With the rest of the cryptocurrency market. As of the time of publication, the average transaction fee on the Ethereum network was US$4.90, reaching a peak of US$69.92 on May 12, 2021.
As the new week begins, Bitcoin (BTC) returns to $57,000, Which ended the turbulent weeks of the price collapse.