BTCST CEO, Alex Zhao, Shares Insight on Why Bitcoin fees hit ATH’s

Over the past few days, there has been a 33% APY increase in the BTCST/BTC vault. The decentralized nature of the BTCST hash rate makes it unaffected by recent regional power outages.

By
Ifeanyi Egede
on
April 24, 2021
Category:
Blockchain News

Bitcoin Transactions Slowed Down

Bitcoin miners were driven offline last week, when an explosion rocked Xinjiang, China. This  resulted in a new peak price for BTC transaction fees. Bitinfocharts reports that the average BTC transaction fees have risen to $59 which is above the previous record of $55, set about four years ago. 

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Currently, at about 134 exahash per second, the overall hash rate is about 39% less than the all-time high of 218 exahash per second, set on the 15th of this month. The CEO of Standard Hashrate Group, Alex Zhao, further remarked that it will take another seven days before power is restored in Xinjiang and miners can return to work. While there have been varying opinions on the effects of this decline in BTC hashrate, its effects can’t go unnoticed as evidenced in the large volumes of unconfirmed transactions.


Significance of The Dropped Hash Rate

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The dropped hash rate led to several unconfirmed transactions, and an increase in transaction fees. Users will have to pay  higher transaction fees than others on the queue for their transactions to be sent ahead of the others. Since the block space is 1MB and developers are yet to find an effective solution to this issue, there is little space that results in a bidding war. This is known as the fee market, users who want faster transaction times will need to pay higher transaction fees. The lightning network is being touted as a possible solution and its capacity has increased recently. The problem with the lightning network is that it can’t move Bitcoin better than other chains that utilize bridge technology. Solutions such as the lightning network, liquid, and RSK haven’t been particularly effective in reducing transaction fees after bitcoin fees reached $50 per transaction in 2017. 

Hence, Bitcoin users may have to embrace these fees or start using other networks such as Binance Smart Chain.


New Crypto Regulations?

Bitcoin is currently trading below $50K as of this writing, that's probably because there are rumors that the bitcoin administration is developing a new crypto regulatory framework. Under these supposed crypto regulations investors would pay a surtax on investment income and other fees as determined by the laws of each state.

The events of the past few days have shown that it isn’t wise for bitcoin miners to concentrate their operations at a single location. The same way the network is decentralized is the same way they need to decentralize their mining operations. Even though Bitcoin users might seek alternative solutions, they might choose to stick with bitcoin when those solutions aren’t as effective as Bitcoin.

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Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile crypto writer and researcher on fintech, the blockchain and emerging technologies. He has several published works online and in the print media. He loves reading, research, traveling, meeting people and football. When he is not writing, he spends time with his lovely wife and kids