Tag: transaction fee

Bitcoin Transaction Fees Experience Significant Drop Following Record High

Transaction costs for Bitcoin, the most popular cryptocurrency in the world, dropped significantly after reaching a record high. This decline, which followed the Bitcoin halving, has drawn interest from the cryptocurrency community. Let’s examine this development’s specifics.

Bitcoin Transaction Fees Plunge: The average charge for Bitcoin transactions has dropped significantly, only one day after hitting a record high of $128 on April 20. The average charge for medium-priority transactions was $8–10 as of April 21. The reduction in prices is a welcome development for Bitcoin users who were previously burdened with exorbitant transaction fees.

Record-Breaking Fees During the Bitcoin Halving: The fourth Bitcoin halving took place on April 20th, which also corresponded with a spike in fees. The halving of block height 840,000 was a significant event in the network’s history. The Bitcoin miner ViaBTC received a fee of 37.7 BTC ($2.4 million), which broke all previous records for the network’s 15-year history. This charge demonstrates the volume of activity and demand that the price reduction produced.

Comparing Bitcoin to Ethereum: Due to the spike in transaction costs during the halving, Bitcoin accrued fees of $78.3 million. This sum more than 24 times above Ethereum’s fees, highlighting the supremacy of Bitcoin with regard to transaction costs. Bitcoin is clearly the most popular cryptocurrency when it comes to transaction volume and costs, as seen by this comparison.

Sustained High Fees and Later Decline: Up until about block 840,200, there were higher-than-usual block fees, but they have subsequently decreased to about 1-2 BTC. This drop in costs suggests that levels will once again be more doable for Bitcoin users.

Effect on Bitcoin’s Price: It’s interesting to note that the price of the cryptocurrency was not significantly affected by the Bitcoin halving event. Bitcoin has increased by a meagre 1.5% after the split, hitting $64,840. Price stability indicates that the market has taken the halving’s impacts into account and is making the necessary adjustments.

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Ethereum's Vitalik Buterin Concerned About Security Risks That Come With High ETH Transaction Fees

By now, it is no secret that Ethereum co-founder Vitalik Buterin and his team are busy perfecting Ethereum 2.0 and preparing it for its official launch.  

Ethereum 2.0

One of the key elements of the blockchain ecosystem is that it runs on a Proof-of-Stake (PoS) consensus algorithm, as opposed to the conventional Proof-of-Work (PoW). This enables Ethereum blockchain users  to reach distributed consensus when mining a block, and for bullish crypto investors to determine the next block. 

Digital asset owners can also lock up their accumulated digital coins and get paid for helping the blockchain. 

Will An Upgrade Make Ethereum Faster, Bigger, Stronger?

However, Buterin came forward and while he proudly announced that the data capacity of the developing blockchain will be huge, the Ethereum creator admitted that the higher transaction fee on the blockchain-network may cause unintentionally trigger security risks. Buterin, who can boast that he has co-founded the second largest blockchain network in the world, behind Bitcoin, came forward in a tweet and mentioned a research paper provided by highly reputed Ivy League university, Princeton U. Buterin wrote: 

“Transaction fee revenue is now nearing half as high as block reward revenue. This actually risks making Ethereum *less* secure because of https://cs.princeton.edu/~arvindn/publications/mining_CCS.pdf. Fee market reform (ie. EIP 1559) fixes this; another reason why that EIP is important.” 

In other words, though it may not be a security issue at this point in time, the higher fees that Ethereum 2.0 will run may potentially cause a security problem long term and be threatening for the blockchain network. The analysis conducted by Princeton university addressed this issue and voiced that selfish mining may pose a real threat, especially in cases where transaction fees surpass the block rewards.

The research paper goes on to name several malicious mining behaviors, that are deviant and may negatively impact Ethereum blockchain.  

Introducing EIP 1559  

The fee market reform that Buterin referred to in his tweet is none other than the “Ethereum Improvement Proposal (EIP) 1559”, which was first introduced in April 2019. The whitepaper proposes upgrades that would make transaction fees on Ethereum more predictable. This would enable the blockchain network to be more flexible, by dynamically alternating the block size based on the number of transactions that are queued and waiting for validation.  

Furthermore, to prevent congestion from happening in the ecosystem, the whitepaper proposed charging users during times of high demand. Buterin publicly voiced his approval and support of EIP 1559 fee market reform. 

Slow and Steady Wins the Race: Ethereum Surpasses Bitcoin 

The market capitalization of Ethereum currently stands at approximately $26 billion dollars. The astonishing thing about this is that the given value does not even include all of the crypto assets founded atop the Ethereum blockchain ecosystems, such as the stablecoins – Tether and USDC –  and altcoins.  

Also, data from digital-asset data firm Messari showed that Ethereum had now surpassed Bitcoin as the network that settles the most value per day. Ethereum blockchain daily settlement value is estimated to be about $2.5 billion, which makes it the first time since early 2019 that the blockchain has outranked its rival Bitcoin. 

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