Bitcoin Fees Reach 20-Month High In December
by Oskar Trotman
On-chain transactions are becoming costly. Fees for Bitcoin transfers in December hit a 20-month high, according to data released by BitInfoCharts. The current average price is $37.2, and experts believe this is not an anomaly but the start of a new trend, which will not be reverting to previous prices like in the past. The last time fees came close to $40 was in April 2021, when users were required to pay $37 to send a token.
The spike in transaction fees is hurting smaller traders and can have repercussions for the general debate about the future of cryptocurrencies. Proponents of blockchain claim the technology will make tokens accessible to everybody, not only the rich, but the rising transaction fees are starting to negate such opinions.
Some industry insiders think the spike in fees is temporary and the result of a wave of transactions burdening the network. On the other side of the debate, opinions are voiced that rising costs will not go away until scaling issues with the network get resolved.
Ordinals Inscriptions Responsible for Price Spikes
Ordinal inscriptions account for over 50% of daily transactions and are a big reason for the fee rise. Since their launch in January, many developers and users have minted over 200.000 Ordinal NFTs, and the community is growing. Relevant to the emerging transaction fee increase, it’s worth mentioning that there is a backlog of 350,000 Bitcoin transactions awaiting verification.
From a technical aspect, Ordinal NFTs are an unintentional product of Bitcoin protocol updates SegWit and Taproot performed in 2017 and 2021. Ordinals make it possible to create Bitcoin NFTs by attaching text, video, or images onto a single satoshi on the base Bitcoin blockchain. Being Bitcoin-native, Ordinals are compatible with the network and do not require alteration to the Bitcoin protocol.
The full impact of Ordinal NFTs on the rise of transaction fees is still debated. However, industry experts look at the current situation as a reminder that innovation is necessary to stabilize the market in the future. The best solution proposed is expanding layer-2 capabilities, designed to facilitate mass crypto adoption and prevent transaction bottlenecks, in turn making the entire process scalable and cheaper.
The Lightning Network is receiving support as a viable option for off-chain transactions settled faster for reduced fees. It’s the most appropriate method to grow and sustain Bitcoin’s user base.
Miners Reached a Revenu Milestone
At a time when high transaction prices are burdening Bitcoin users, miners are reaping the rewards for their efforts and profit from the surge in costs. Data for November shows that miners have generated $1.16 billion in revenue, with transaction fees contributing $142 million to the total, making November this year’s most profitable month for miners.
Concerns over high fees are not slowing down Bitcoin. The network is functioning as intended, and the price of Bitcoin is resurgent, reaching around $42,000 on Monday, December 18.