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Debunking the FUD surrounding Bitcoin transaction fees

Debunking the FUD surrounding Bitcoin transaction fees

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Bitcoin FUD comes in all shapes and sizes, from rampant energy consumption to rampant crime.

Since 2017, the World Economic Forum has been Warning that Bitcoin will eventually consume more power than the entire world. Governments around the world have campaigned against Bitcoin mining and warned of its impact on climate change.

Regulators have also waged war on Bitcoin. Law enforcement agencies and central banks argue that it is not a secure network because it is vulnerable to attacks and manipulation while providing infrastructure for money laundering and crime.

However, all these claims are not only baseless, but also completely false.

Although they can be argued in a number of ways, Bitcoin transaction fees offer the simplest explanation.

Bitcoin transaction fees are the lifeblood of the Bitcoin network and they secure the network in both the short and long term.

Critics of the network fear that as block subsidies decrease with each halving, the payments alone will not be enough to prevent miners from shutting down their machines. Miners leaving the network en masse would greatly reduce the speed of the network and leave it highly vulnerable to attack.

These claims are highly hypothetical and equally improbable. The security of the Bitcoin network has remained strong since its inception more than ten years ago. None of the major events experienced by the network have so far succeeded in breaking its information security foundation.

In 2017, the network saw one of its first major congestion issues when Bitcoin hit $20,000. Transaction fees rose to an all-time high as a result of massive sales. Once the correction began, transaction fees began to drop significantly, leaving many to wonder if such a sudden drop in mining revenue could affect the network.

Since 2017, the Bitcoin network has completed trillions of dollars worth of transactions with only a fraction of the fees. Throughout 2022, mining fees have remained relatively flat. As Lightning Network and SegWit become more common, congestion becomes even rarer.

bitcoin transaction fees
Total Bitcoin network transaction fees between 2010 and 2022 (Source: Glassnode)

Those concerned about Bitcoin’s security believe it is only a matter of time before it experiences an attack.

However, any kind of attack on the Bitcoin network would undoubtedly lead to a significant increase in mempool fees. Users would start competing for the next block with higher and higher fees, making it more expensive for attackers to control the network.

This can be seen in the huge spike that occurred during the Terra (LUNA) crash in May of this year. The total amount of transaction fees pending in Mempool increased more than tenfold as users began to race to sell their Bitcoins before it dropped too low. Those willing to pay higher fees saw their transactions processed and losses contained, while those whose transactions were recorded had to wait for the backlog to clear.

memo on bitcoin transaction fees
Total amount of Bitcoin payments in mempool from November 2021 to September 2022 (Source: Glassnode)

This is an indication of network security. Transaction fees are the lifeblood of the network that keeps it running and the defense mechanism that keeps it safe even in times of high volatility.

Posted in: Bitcoin, Research

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