BitPay, one of the largest bitcoin payment processing platforms for online merchants, will no longer process payments below $100 due to rapidly rising bitcoin transaction fees.
Over the past few months, the size of the bitcoin mempool has increased to more than 100 million bytes and the number of users, average transaction per day, and user activity increased exponentially. As a result, given the lack of adoption of Segregated Witness (SegWit) and the fixed block size of bitcoin at 1MB, the average bitcoin transaction fee has surpassed $30.
According to Bitcoin Fees, a bitcoin transaction fee prediction platform developed by Earn.com (previously 21 Inc), the fastest transaction fee at the time of reporting is 950 satoshis per byte, or 214,700 satoshis for a median-size transaction, which is equivalent to $28.7.
Consequently, BitPay revealed in an official statement that the company will not be able to process bitcoin payments below $100, as doing so would result in a fee of nearly 30 percent of the actual amount of the transaction. The BitPay team wrote:
“The Bitcoin network has been seeing record transaction volume in the last few weeks. This growth has also led to record network congestion and record-high bitcoin miner fees. Bitcoin miner fees are now more than $30 per transaction on average. To protect purchasers and to continue to offer service for Bitcoin payments, we are now requiring a new invoice minimum payment amount of $100 on all BitPay invoices.”
In the upcoming months, BitPay explained that its development team will actively work on the implementation of SegWit, which will reduce bitcoin transaction fees by around 40 percent. The BitPay development team added, “Segregated Witness reduces the size of bitcoin transactions, allowing for an average bitcoin miner fee reduction of over 40%.”
As demonstrated by Blockchain, the second largest bitcoin wallet platform and market data provider, bitcoin is currently processing nearly 300,000 transactions on a daily basis with block size averaging at 1.06MB. That is, a size larger than the maximum block size of 1MB, made possible through SegWit.
Luke Jr, a Bitcoin Core developer, stated earlier today that SegWit itself was not designed to reduce transaction size and fees but rather as a platform and base infrastructure for second-layer solutions like Lightning. He noted that Lightning will enable near instant payments with privacy and lower fees, allowing the Bitcoin network to scale.
However, the timeline of Lightning integration by leading businesses remains unclear, as even SegWit has not been integrated by Coinbase, Blockchain, and BitPay, three of the largest bitcoin businesses in the industry.
“Segwit does not decrease the size of transactions. That’s a myth. Lightning is the method of reducing block sizes (and also fees) that I had in mind,” said Luke Jr.
To relieve the congestion of the Bitcoin network, analysts suggest that a block size increase is necessary, at least until SegWit and Lightning are fully adopted by the industry.
Featured image from Shutterstock.
Last modified: May 20, 2020 9:15 PM UTC