The BTC price recently surged to $5,000. This movement was accompanied by an increasing number of transactions (and resulting fees) on the Bitcoin network. The current average transaction fees ($1.9), albeit not as high as it was the first time bitcoin crossed the $5000 mark in 2017 ($4.4), have raised concerns about a potential congestion, slow operations and high costs on the network, should the rally continue.
This article explains why slow transactions and high fees on the main Bitcoin blockchain is not a matter of grave concern.
Chart from bitinfocharts.com shows the sharp increase in average BTC transaction fees.
Prioritizing Security On Bitcoin
Firstly, it is important to note that Bitcoin prioritizes security over speed and low fees. While it’s true that faster and cheaper mediums of exchange existed before Satoshi’s invention, censorship resistance and secure transactions are paramount for this technology. Consequently, the focus is on enabling users to store funds that cannot be confiscated. Allowing transfers that cannot be blocked by any authority is another priority.
The bitcoin hashrate is a key determinant of the security of the network. Hashrate refers to the amount of power being used by miners to keep finding blocks. Networks with higher hashrates are more secure since they make 51% attacks more expensive to execute. This is because an attacker will have to control more than 50% of a network’s hashrate in order to carry out that majoritarian attack. Hence, the Bitcoin network is more secure with more miners.
In order to encourage more miners to join the Bitcoin network, the transaction fees that come with block rewards will have to be high enough to keep the operations profitable. In simple terms, low fees disincentivize miners. Also, fewer of them also lead to a less secure network.
This is why users need not be overly worried about high fees on the main bitcoin blockchain. The incentive system for miners makes it nearly impossible to simultaneously prioritize the security of the network, push for increased adoption and have very low fees.
The Lightning Network Offers Lower Transaction Fees
The Lightning Network has seen increased adoption since its launch. At the time of writing, the network had 7,805 nodes, 38,963 channels and a capacity of 1076.48 BTC. More importantly, the median transaction fee on the LN is $0.000048684, or 1 satoshi.
The Lightning Network — with its negligible fees and almost instant transactions — makes it unnecessary for the Bitcoin community to compromise the security of the main chain in a bid to lower fees. For instance, there is no need to complain about the current $1.98 average transaction fee on the main blockchain. A user can simply opt for the Lightning network when making small payments.
Presently, there is no excuse to not use the Lightning Network since many user-friendly wallets have been developed to enable users to easily and seamlessly make transactions on this second layer. Eclair, Zap the Bitcoin Lightning Wallet are examples of Lightning wallets with great and intuitive user interfaces and experiences.
It is true that opening and closing Lightning channels involve on-chain transactions. Such on-chain operations do not incur the minimal fees associated with transactions executed when a channel remains open. Here, users still have on-chain transaction fees to worry about when leaving and returning to the Lightning network. Critics will, however, agree that Lightning still offers significantly lower fees in general, when making multiple transactions.
There are also custodial Lightning wallets for users who prioritized low fees over decentralization. These solutions go against the ideals of bitcoin because they are centralized and do not give users 100% control over funds. They are, however, beneficial when it comes to low fees and somewhat convenient to non-technical users. This is because they keep channels open for their customers, so they can make transactions without worrying about on-chain transaction fees.
The implementation of the Lightning Network may not prevent the occasional spike in bitcoin transactions fees. However, the satoshis you pay for every operation on the second layer network remain insignificant. Depending on preference for security or low fees, users can choose from on-chain transactions and Lightning transactions from either custodial or non-custodial wallets. There is, therefore, no point in worrying about fees on the main bitcoin blockchain.