BitGo Implements Dynamic Bitcoin Transaction Fees
BitGo, a multi-signature Bitcoin wallet, has introduced dynamic transaction fees to give users more options. The dynamic fees are in response to longer transaction times driven by an increase in transaction volumes. Users can now select fees that price automatically based predictable processing periods.
“Many transactions have taken longer than usual to confirm,” BitGo notes on its website. “As of (this) writing, the number of unconfirmed transactions is now well into the tens of thousands and continues to rise. To the user, this means that important operations such as exchange deposits are being delayed for hours, with no guarantee of confirmation time.”
Transaction Fee Surges
On July 8, 2015, the estimated fee was 0.00026823 BTC/kb (USD $0.07 per kb), representing a surge pricing of approximately two times the fee estimated on June 17, 2015 (0.00012502 BTC/kb, or USD $0.03), the website noted.
“As a response, BitGo has implemented dynamic fee rates on our wallet,” Ben Davenport, chief technical officer and co-founder, told CCN.com. “The fees will be below standard during times of low bitcoin network congestion and proportionally higher during periods of high congestion. BitGo platform and wallet users will now enjoy the added benefit of having their bitcoin transactions processed in a more expedient and predictable manner. Our initial benchmarks estimate an average confirm time of about 2 blocks (20 minutes) with the enhanced fee estimations.”
How Bitcoin Wallets Respond
Davenport said most wallets are reacting in one of three ways to the current surge in transaction activity.
- Doing nothing and hoping the problem goes away.
- Giving users more control over fees. This only works if users have some sense of what the fee should be, but they usually don’t. “It’s really just pushing the problem onto your users,” Davenport said.
- Implementing dynamic fees that respond to network congestion conditions. “We think it’s the best path forward – the software ultimately needs to make smart decisions, with some input from the user on the urgency of the transaction.”
Davenport said consumers are already familiar with dynamic pricing in other arenas, such as airline seats, and Uber’s surge pricing.
“The idea that a marketplace for fees would eventually develop has been around since the beginning of bitcoin,” he said. “And the code for making fee estimates has been built into bitcoin since version 0.10, and work by Alex Morcos in 0.11 has greatly improved them. We’re currently using the 0.11 fee estimates in our implementation, but we additionally adjust based on our own measure of congestion, because the estimates don’t currently adjust quickly enough to big spikes in transaction volume.”
Also read: New Site Predicts Bitcoin Fees and Transaction Times
Will Users Accept A 20-Minute Confirmation?
Asked if people will wait for 20 minutes for a transaction to complete, he said, “I think people are already waiting that long and longer for transactions to go through in practice. Our platform users have the ability to directly specify how urgently they wish to transact, and I anticipate we’ll also add some control over that into the wallet product as well.”
“We will be watching expectantly for fees to drop when transaction volume decreases,” the website notes.
Images from Shutterstock and BitGo.
