Debunking Bitcoin Transaction Fee Myths: Expert Explores The Role Of Urgency And BRC-20 Tokens

Blockchain consultant, developer and researcher Udi Wertheimer has explained the recent increase in Bitcoin transaction fees, highlighting the role of “urgency” in transaction dynamics.

12 May 2023, Wertheimer analyzed the drastic increase in Bitcoin transaction fees in recent weeks. On April 23, 2023, these fees were as low as $0.872, but by May 8, 2023, they had risen to $30.91. Yesterday this fee was $3,763.

Wertheimer took to Twitter, where he has a significant following of over 168K, to share his insights.

Wertheimer sought to debunk a common misconception regarding transaction fees, arguing that these fees do not rise simply due to full blocks, but instead increase when users demand expedited transaction confirmation. He argues that the need for urgency, not blocking capacity, motivates users to pay more.

In a surprising revelation, Wertheimer attributed part of the recent increase in Bitcoin transaction fees to inscription numbers, a consequence of the growing popularity of inscriptions. He explained that speculators racing to secure inscriptions with low serial numbers increased the fees, as they believed these “early inscriptions” would have a higher value. This led to intense competition and a willingness to pay higher transaction fees.

Another factor that contributed to the fee increase was the behavior associated with the BRC-20 tokens. Wertheimer elaborated that these tokens will be minted until a supply limit is reached, once publicly announced. Consequently, users tried to get their transactions confirmed before this limit, which created an increase in urgency and transaction fees. Wertheimer argued that these users would pay high fees if they believed in the token’s future value.

Wertheimer challenged another misconception, pointing out that BRC-20-related transactions would still encourage users to pay higher fees based on their expectations of profits, even if they are more compact or efficient. Efficiency and compactness will therefore not necessarily lead to lower fees.

Wertheimer concluded his remarks by stressing that Bitcoin transaction fees are likely to remain unpredictable due to fluctuating transaction speeds. However, he welcomed these changes as a sign of life in a former “zombie chain”.

He wrote:

“To summarize, fees increase when participants want transactions confirmed URGENTLY. They go down when transactions are no longer urgent. It is difficult to predict urgency. What we can predict is that since the laser-eye gatekeepers lost their grip on the bitcoin protocol, more unique experiments will emerge, and transaction speeds will continue to fluctuate. The days of bitcoin as a zombie chain are over.“