There had been concerns that Bitcoin transactions were becoming costly – even though they were still largely cheaper than what pertains with traditional financial systems. The increased transaction fees became a source of concern as some users migrated to using other blockchains for their settlements.
A cross-section of Bitcoin stakeholders had their say and suggestions on steps to mitigate the situation. Blockchain wallet, a bitcoin wallet provider has been suggesting 55 satoshis per byte which translates into about $1 in fiat terms. We are currently witnessing transaction fees of around this figure and even sometimes lower. About a month ago, median transaction fees reached a peak of around $30. This was particularly pronounced on non-segwit wallets and exchanges. SegWit-based mediums however have the potential of reducing transaction fees by up to 35%.
Bitcoin developers have been hard at work on the Bitcoin Lightning network which does not only make transaction fees cheaper, it speeds it up too. Additionally, several cryptocurrency companies and platforms are beginning to incorporate and activate segwit which further drives down transaction costs.
It has also been observed that some Bitcoin blocks are beginning to achieve 2 MB block sizes even without a conscious move to increase block sizes. Last week, BitGo, a multi-signature security service provider and blockchain tech company revealed that 2 MB blocks have been mined. This has been attributed to SegWit-optimized transactions. This mechanism has also contributed in the lower fees we are currently witnessing. This 2MB block size increase as reported by BitGo shows that without the need to deliberately increase block sizes, Bitcoin blocks can expand to 2MB just with SegWit integration. BitGo report states that “The first 2MB Bitcoin blocks were mined on block 505253 – https://blockchain.info/block-height/505253” That block size was 2.217 MB.
According to a Cornell research paper, “Bitcoin nodes generally have higher bandwidth allocated to them than Ethereum. Compared to our previous study in 2016, we see that the median bandwidth for a Bitcoin node has increased by a factor of 1.7x. The typical Bitcoin node has much more bandwidth available to it than it did before. Higher allocated bandwidth indicates that the maximum block size can be increased without impacting orphan rates, which in turn affect decentralization”
Bitconists expect that in the mid-term on-chain scaling will be implemented – this will introduce a synergy with SegWit and also help to effectively incorporate two-layer scaling solutions such as the Lightning Network. It is believed that the capacity of the Bitcoin blockchain to handle more transactions will be increased and create a less congested network leading to resultant lower fees and faster transactions.