Bitcoin has a relatively high transaction fee – near (U.S.) $4.00 per transaction (median) -both compared to other crypto and to its historical price levels.
We believe bitcoin’s high transaction fees will make it difficult to become a currency of everyday use while these high fees remain. Further, we see a significant market opportunity for alternative coins to gain market traction.
Bitcoin fees don’t need to get larger as transaction size increases. It costs the same to record a transaction whether you’re buying a latte or a Bugatti.
The going rate is about 150 Satoshis (each BTC contain 100 million Satoshis) per byte, and a median transaction is currently 226 bytes, giving a median fee of 33,900 Satoshis, or at the current price of US$11,417.60, US$3.87. Because transactions costs are negotiated with miners, and a HODLer (owner) of BTC can pay more for a transaction and it will clear and confirm faster, there is volatility. In the last month, median daily fees have fluctuated between $2.84 and $12.89.
Bitcoin has gone up in price, more than tenfold in the past year. This does explain the majority of the rise in transaction costs (see below) when expressed in US$. But not all of it – the median transaction fee was US$0.158 a year ago. And the fact remains that a latte isn’t something you want to pay a four dollar transaction fee on. And that’s a problem for BTC as a medium of transaction. But not the only problem.
Bitcoin Has Serious Competition on Transactions Costs
As we can see, not only have Bitcoin’s transactions fees increased dramatically over the past year, competing currencies – Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC) have far lower fees (BCH started trading in August 2017 so one year comparisons are not available).
The other currencies are not yet as established as Bitcoin, and their costs have increased over the past year. But with median fees of 2 cents to 17 cents, it’s the range that wouldn’t affect your buying decision for an episode of Game of Thrones. Or a latte. Markets correct for this sort of imbalance.
Something’s gotta give.