The development of scaling solutions, coupled with a decline in Bitcoin transaction throughput, has resulted in Bitcoin fees falling below a dollar. A so-called “Bitcoin whale” (someone who owns large amounts of Bitcoins) took advantage of these declining fees and moved 48,000 Bitcoins for just four cents.
A $290 million transaction for four cents
The high Bitcoin fees were the issue in December 2017 when they briefly reached $50 as the network confirmed nearly 400,000 transactions per day. Since then, transactions have halved and dropped to an average of 200,000 per day.
This decline in transactions has allowed Bitcoin to delete the mempools, as the network was clogged by transactions in the second half of 2017. According to Blockchain.info, the number of transactions waiting for confirmation has dropped from an average of 100,000 to 5,000.
Has allowed Bitcoin Profit
It has been widely speculated that Bitcoin’s critics, who were out to ruin Bitcoin’s credibility and reliability, deliberately increased the fees for Bitcoin transactions. They are said to have littered Bitcoin blocks with ‘spam’ transactions. Others Bitcoin Profit observe that the exponential increase in transaction fees was also due to Bitcoin’s growing interest.
The BTC Wal executed a Bitcoin transaction worth over $290 million for four cents in fees. The transaction took place yesterday evening when the Bitcoin user transferred 48,500 Bitcoin. One Twitter user put it suitably:
“Can you imagine moving 300 million dollars for 0.04 dollars with the traditional banking system? No, no, you can’t.”
For years, the crypto community has been looking for a way to reduce transaction fees to a minimum while increasing the throughput rate for Bitcoin transactions.
Scaling solutions: Segwit and the Lightning Network
Segwit is an enhancement to the Bitcoin network that changes the transaction format of BTC transactions. Segwit enables a drastic reduction in transaction size, which helps reduce charges while allowing a larger number of transactions to be stored within a block. This protocol, which was activated in August 2017, has already established itself in the network, with over 36 percent of all transactions now running through Segwit addresses.
The implementation of the Segwit protocol was critical in ensuring that the Lightning Network, another scaling solution, could work. The Lightning Network is an off-chain scaling solution that promotes the use of Bitcoin for micro payments. This special scaling solution uses balance sheets, payment channels and multi-sig addresses. By using this system, thousands of transactions could be performed per second for minimal fees.