Bitcoin Transaction Fees Spike 10x, No DDoS Says Dev – Trustnodes

Users of the bitcoin network have paid 403 BTC in fees on an otherwise quiet Sunday with a significant increase in May.

For much of April, bitcoin miners were earning around 20 BTC and at most 40 bitcoins a day, but as of earlier this month, it has picked up speed.

The reason is because the 2017 bitcoin network update through segregated witnesses (segwit) is only now being used, albeit not quietly for what it was intended for.

The upgrade was intended to facilitate adoption by other layers such as the Lightning Network (LN), or semi-proprietary products from Blockstream, such as their Liquid sidechain.

Both may rely heavily on signatures, mainly to “bridge” the coin ownership between the base block chain and the other layer or side chain, and so these signatures were given a 75% discount on fees, but neither LN nor Liquid have found much use.

For LN, the lack of adoption is likely primarily due to the highly complex nature of the network that requires bitcoin collateral – with almost no return – to facilitate transfers.

While for Liquid, its significant security and permissionless trade-offs cannot easily compete with other alternative base layers or other layers.

But the, at the time, somewhat controversial segwit upgrade is finally finding use in… well, frog pictures.

Crypto outlets are tracking almost by the second what happens to Pepe, with a headline saying that a whale lost $500,000, in a $1 trillion crypto market.

Another tells us that Pepecoin has entered 110th place in crypto market value. This is while banks are collapsing, Bitcoin Magazine has a nice exposure in the NY Times, and much more is happening.

But Changpeng Zhao of Binance decided to temporarily stop withdrawals due to on-chain fees.

For this one, it wasn’t just crypto outlets tracking it after the second, but entities like Reuters giving us headlines about the break and then the restart and the second break.

Bitcoin’s price fell to $27.80 after approaching $30,000 on Friday, making the Binance move somewhat controversial as some bitcoiners vent.

2017 again?

Some frog stuff seems to keep popping up around this part of the cycle as it was the Chainlink frogs last time and now we have jpeg frogs.

To make matters less confusing, we have two of them. Crypto media is obsessed with ERC20 Pepecoin running on ethereum, but there is a Pepe on BRC20 running on bitcoin.

BRC20 is the new name for what early bitcoiners may remember as colored coins. It’s a little different, because this also has the Jason Parser, json, and that’s really what it is: a bit of json on a satoshi to distinguish it from other toshis.

To non-coders, json is a bit like the colored tabs in a well-organized paper folder. It’s a way to nicely specify information like names or dependencies or data.

BRC20 uses the bit of data that was intended for LN and just like that you have NFTs running on bitcoin, or tokens without jpegs.

Together they are worth around $1 billion in market capitalization, up 5x in just days. And then the bitcoin block size is now up to 1.7 MB from the usual 1.1 MB, and the number of transactions per block is also doubling.

Because of the way segwit is designed, these frogs can sort of be prioritized over normal transactions because there is more space available for them in a block and for 75% less in fees than normal transactions.

A block of only normal transactions can only be about 1MB. A block with only signatures, which is theoretically possible, can be 4MB.

In the five years since segwit was implemented, bitcoin blocks remained at 1MB despite theoretically having a capacity of 4MB, because almost no one used the signature part with LN stagnating at around $100 million in capitalization.

The use of the signatures through the token changes that, and what was meant to be a second-class user on-chain to effectively force LN adoption is now a second-class user for frogs.

There was a whole ‘civil war’ in bitcoin because of this issue, so some are laughing now, but is there cause for concern?

No DDoS, just Segwit

The Bitcoin network is being used as it has been coded, and the consequences of those uses are due to the trade-offs made in 2017, so the network is working as intended, in a way.

BRC20 “only increases transaction fees and fills up blocks, it doesn’t stop full nodes from operating or knock them offline. So I personally wouldn’t call it a DDOS attack,” says Michael Folkson, a bitcoin protocol developer, adding:

“I don’t think anything will or should be done. It was expected that transaction fees would rise over time through normal onchain transactions and the Lightning channel opening and closing. This type of use only causes transaction fees to become higher prematurely.”

Nor is it the first time fees have reached these levels. They reached 700 BTC a day at the peak of the bull in 2017, and in USD they were significantly higher in April 2021 after another peak in bitcoin’s price.

Binance didn’t exist in 2017 and didn’t pause withdrawals in 2021, so the decision to do it on a quiet Sunday is due to boredom, crypto politics, or they manually set the network fee they deduct from withdrawals and need some time to adjust it, if so will it be due to strained communication.

Because the on-chain fees are basically not Binance’s business – apart from what they need to deduct from withdrawing customers – but the customers’.

The Bitcoin network works. Blocks are processed, transactions move, and so an exchange has no good reason to pause withdrawals because of the network.

They may have their own reason for not automating network fee measurements and fees, but Binance has been around for a while and fees have been volatile throughout this time. Therefore, some have accused the exchange of playing cryptopolitics.

But good for corn?

Aside from Binance’s opinions, these frog developments are more nuanced for holders, but with their own costs and benefits.

On the cost side, a significant concentration of value on NFTs can put downward pressure on the base coin when that base coin is converted to fiat.

Beeple kind of “crashed” when he paid out back in 2021, and these frogs may “crash” bitcoin when they’re done partying.

On the other hand, NFTs brought significant demand for eth and may do so for bitcoin as well.

Since bitcoin is still proof of work, these frogs may even pay for network security, and if they do, the 21 million limit may remain.

Otherwise, some developers have suggested that it should be lifted, but with frogs on board it won’t be necessary since miners currently receive as much in fees as in block rewards.

For network users, however, an expensive network becomes much less attractive. Fees at these levels have therefore not been sustainable, and the market is unlikely to sustainably tolerate fees of more than around $10 per transaction.

But for now, there is clearly a bull going on in the BRC, and as long as it lasts, the bull participants are willing to pay a lot more than usual.

The normal transactions during this period are civil damages, and irrelevant from an investment perspective while the bulls are around.

Especially because these bullfrogs will eventually rub off the base coin, making the base coin potentially bullish as well.

However, BRC is fundamentally a copy of actual NFTs, which as a new invention at least in acronym attracted a lot of attention.

The BRC bull may therefore be more of a bear market bull, rather than a bull bull, but it is still a sign of excitement and some skepticism that should provide some confidence for investors following along.

Because the tax policy is over as solutions to it are difficult and take time. Complaining about these fees, instead of codifying solutions that have acceptable trade-offs, is therefore somewhat futile in front of these frogs.

And then enjoy it all. The quiet family party before the many guests arrive and pretty much before it gets so noisy that we get tired of it.

The bit where the actual doers are in stealth and the rest retells the good stories of NFT days or Jason Parser or the blocksize wars.