Sending cryptocurrency to the Bitcoin network has never been more expensive, with transaction fees reaching new heights due to a number of interconnected factors. According to YCharts data, the average Bitcoin transaction fee is €62 at the time of writing, making all high-volume transactions unsustainable. It was only during the last period of crypto mania, at the end of 2017, that transactions on the Bitcoin network were still almost as expensive.
Bitcoin transaction fees
The sudden increase in transaction fees is the result of a cocktail of different factors and events that, on their own, might not have had such a dramatic impact. In part, the rise in fees can be attributed to high levels of network congestion caused by a sell-off earlier this week due to a drop in the price of Bitcoin, along with efforts by some investors to buy the soak. This congestion problem was compounded by a drop in mining power, caused by an explosion and flooding in coal mines in areas of China that are home to a large number of Bitcoin mining companies. With coal-fired power plants unable to provide some major mining operations, the collective power of miners on the Bitcoin network has been reduced by somewhere in the region by 25-30%. Additionally, following a cryptocurrency run dating back to November, Bitcoin mining difficulty is currently at an all-time high, meaning more computing power is needed to process transactions. Traditionally, transaction blocks are processed approximately every ten minutes, but the high mining difficulty and low hash of the network means that some blocks take an hour or more to digest, which is unprecedented. Mining difficulty, which fluctuates with changes in the total hash, is automatically recalibrated after every 2016 blocks processed (approximately every two weeks), meaning a drop in difficulty should occur in early May. A decrease in mining difficulty and the recovery of Chinese mining companies should, in theory, translate into reduced congestion and a lower cost of Bitcoin transactions. Via CoinDesk