2 Reasons Bitcoin Transaction Fees Are So High Right Now

If you make a Bitcoin transaction, chances are you will have to pay a fee. But this fee does not remain at one figure. Bitcoin transaction fees vary constantly and are affected by several factors. At the time of writing in May 2023, the fees of the Bitcoin blockchain are unusually high, causing frustration for users. But why are Bitcoin’s fees so high right now, and can you do anything to tackle the problem?

Why Are Bitcoin’s Fees So High?

A look at YCharts shows that on May 1, 2023, Bitcoin transaction fees began to skyrocket, peaking at $7.24 on May 3. But what is the reason for this shocking fee increase?

Crypto transaction fees vary as various factors drift in and out of influence. At the time of writing, however, there are two key issues pushing Bitcoin’s transaction fees upward. Let’s start with the emergence of the BRC-20.

1. The rise of BRC-20

BRC-20 is an experimental token standard launched in March 2023. Different token standards govern how and where cryptoassets can be used.

BRC-20 is a token standard inspired by Ethereum’s ERC-20 (the Ethereum standard that governs its standard, fungible tokens). The standard itself was created amid the growing popularity of Bitcoin’s Ordinals protocol. In fact, the core purpose of BRC-20 tokens lies within Bitcoin Ordinals.

While Bitcoin Ordinals are considered non-fungible, BRC-20 tokens are fully fungible, just like ERC-20 tokens. With BRC-20 tokens, users can trade fungible assets within the Ordinals protocol.

As is the case on the Ethereum blockchain, the BRC-20 standard has given way to the creation of many meme coins. Meme coins are assets named after popular internet memes, such as Doge and Pepe. In fact, these two memes already have cryptocurrencies attributed to them.

Some meme coins have done very well, such as Dogecoin and Shiba Inu. So it is no surprise that they have appeared in the Bitcoin space with the rise of BRC-20. Some BRC-20 meme coins have received a lot of hype during the first months of 2023, increasing their market value significantly. Popular examples of BRC-20 tokens include ORDI, PEPE, DOMO and PUNK.

Because these tokens are Bitcoin-based, their increasing popularity puts additional stress on the network. A high network load usually gives way to higher transaction fees, which is exactly what has happened on the Bitcoin blockchain via the growth of BRC-20 tokens.

2. The popularity of Bitcoin Ordinals

The Bitcoin Ordinals protocol was launched towards the end of 2022 and continues to grow in popularity as more people realize its potential. The Ordinals protocol enables the creation of non-fungible, Bitcoin-based assets. This is done by entering data in a satoshi, a small fraction of a BTC.

Using Ordinals, Bitcoin users can create their own NFTs, further competing with the Ethereum blockchain, which has supported NFT creation and trading for years.

As people continue to create and trade Ordinals on the Bitcoin blockchain (for which you need a Bitcoin Ordinal wallet), the network load remains higher than usual. Again, this often gives way to higher transaction fees for users.

It is also worth noting that the Bitcoin blockchain is not particularly suitable for high demand. Because most Bitcoin blocks are only 1MB-1.5MB, each block processes a limited number of transactions, leading to long waiting periods and sometimes higher fees.

How to Avoid High Bitcoin Transaction Fees

If Bitcoin’s expensive transaction fees are a concern of yours, there are a few things you can do to hedge against the problem.

First, make sure you don’t make Bitcoin transactions during peak hours. There are times during the day when more people use the Bitcoin blockchain. According to FOREX, cryptocurrencies are most often traded between 08.00 and 16.00. So to reduce Bitcoin transaction fees, consider trading earlier in the morning or later in the evening.

You can also group your Bitcoin transactions. Batching of transactions involves including several different transactions in a single transaction. By aggregating your transactions, you can reduce the amount of data you add to the network and reduce your fees.

Finally, you may want to use a zero-free cryptocurrency exchange to trade Bitcoin. If you have to deal with high transaction fees, maker, taker or spread fees, the various costs can add up quickly. Using a zero or low fee crypto exchange can reduce the total fee you pay per Bitcoin transaction.

Bitcoin’s fees are always changing

While it’s great to take advantage of periods of low fees, it’s also important to note that cryptocurrency transaction fees can skyrocket in a matter of hours. Bitcoin is no exception to this rule. So, to avoid being hit by a sudden price hike, consider the tips above.