Bitcoin (BTC) transaction fees have dropped from $4.40 to $1.80 this year, a 57.97% decrease, What can be several factors leading to this result let's see
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A YCharts analysis shows that Bitcoin (BTC) transaction fees have dropped from $4.40 to $1.80 this year, a 57.97% decrease. Several factors are contributing to this decline.
- It may have been triggered by the rapid expansion of the Bitcoin Lightning Network, through which transactions are done off the blockchain.
- A Bitcoin transaction costs a fee, which is split among miners, when a network is crowded and demand for transaction processing exceeds miners’ capacity, users typically pay higher fees.
Due to high demand for bitcoin, the average transaction fee on the Bitcoin network rose to all time high $62.8 per transaction in the month of April. The spike occurred because China-based miner outages slowed block production at a time when the network was experiencing high transaction volume.
Bitcoin miners became less skeptical and didn’t lose interest in processing transactions, which may explain the drop in costs. As a result, the mining difficulty, which is a measure of how hard it is to validate a Bitcoin transaction, falls.
It’s also possible that the declining transaction costs are due to the decongestion of the mempool, the pool that holds pending transactions until they’re confirmed. Once a transaction is sent to the Bitcoin network, it stays in the mempool until it’s confirmed, considering that each Bitcoin block is 1MB in size, a large mempool may encourage miners to prefer more lucrative transactions. In these instances, customers are forced to pay more for their transactions to avoid getting stuck in the mempool, raising the overall cost of transactions on the Bitcoin network. In recent months, the number of transactions has dropped significantly. In early 2021, there were more than 350,000 transactions per day on average, but the number has now dropped to somewhere between 250,000 and 213,000 transactions per day on average.
One more reason for the drop in transaction costs may be because traders and holders of Bitcoin use less BTC. This decrease in demand causes the cost per token to fall, which reduces transaction costs. Also Ethereum fees have fallen with the rest of the cryptocurrency market, The average Ethereum network transaction fee currently is $4.90, after peaking at $69.92 on May 12, 2021.
Bitcoin traders being relaxed after Bitcoin price has returned to $57,000 as a new week unfolds, ending a heavier price drop in past few weeks.
