$5,700,000 in pending fees
One of the many benefits of Bitcoin Cash (BCH) is low fees: less than 1 US cent for common transactions (example: moving $2,000,000 for less than $0.01). I would like to share a perspective from the recent past that shows what happens when we do not guarantee low fees.
What makes Bitcoin Cash (BCH) fees low?
The reason BCH fees can be very low is that BCH aims to include all mempool (pending) transactions in the next block at all times. In other words, there is about zero competition to get into the next block. The larger the max block size, the more confident we can be in achieving that.
What happens when blocks fill up on the Bitcoin Cash (BCH) chain?
As above, the short answer is that they should not fill up because BCH miners and devs keep the size large enough to handle all transactions. It is one of the main points of the BCH fork: money that works for everyone with predictable low fees.
Here is the worst case I could find of blocks filling up in the post-fork history of BCH. The graph shows the total fees for pending transactions.
Most importantly, you can see that pending fees continuously drop back down to zero, indicating that all pending transactions are being included in blocks quickly. The spike around Jan 15, 2018 was maybe the worst that has happened. 1.4 BCH @ $1,300 --> about $1,800 in pending fees. The recent increase of max block size from 8MB to 32MB will help to eliminate even minor events like this one.
What happens when blocks fill up on Bitcoin Core (BTC) chain?
Let's focus on the total pending fees like we did with BCH. Here is the same time period as the BCH graph, but you might notice that the y-axis is completely different:
The BTC protocol limits blocks to 1MB (arguably slightly more with Segwit). For months, users were competing for space in the BTC blockchain. Fees went through the roof as you would expect. Users who were unwilling to pay $5, $10, $20, $50 for a single transaction were locked out. Their money was frozen. The result: failure as money - even the wealthy will lose to the ultra wealthy and all will eventually seek less expensive alternatives due to unpredictable and high fees.
Also just look at the big picture of that graph: the peak of 360 BTC @ $15,900 means about $5,700,000 in pending fees.
$5,700,000 in pending *fees*, not transaction value
That is not p2p electronic cash. The world cannot use that to transact, and if it tried, the fees would eventually be larger than the balances of most users.
Layer 2 systems are a different discussion, but they are also harmed by unpredictable and high base layer fees. Again even in wealthy countries, who wants to spend $50 to get onto the second layer and $50 again to get off?
Let's remember to keep this fundamental feature at the heart of Bitcoin. "Low Fees" is a very good feature and easy to lose with mismanagement of the protocol.
But are high fees actually common on BTC and rare on BCH?
If you didn't know about blockchair, it's wonderful. Here are two queries of high-cost transactions (let's say more than $10 for a common 300 byte transaction):
- High-fee transactions on BCH since 2017-08 (~800/6.2M = 0.01%)
- High-fee transactions on BTC since 2017-08 (~15M/74M = 20%)
Why "Pending Fees" instead of "Pending transaction count" or "Pending transaction size"?
One of the reasons I wrote this is that I often see people talking about the number or size of pending transactions. Those are also important but:
- Pending transaction count can be skewed by many small transactions.
- Pending transaction size can be skewed by a few large transactions.
- Pending fees indicates how much value users were actually willing to pay to make transactions of any type. It is harder to "fake" than making many transactions or heavy transactions.
Please support the sites that provide the data and visualizations
- https://jochen-hoenicke.de/queue/#1,6m (he has a donation address)
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