Bitcoin capacity problem not a ‘nightmare’, but high transaction fees may become the new normal

While Bitcoin may not face the “nightmare” scenario reported by mainstream media, Bitcoin users will now need to pay above-average fees and wait longer for confirmations due to unknown disruptive network users.

The incident comes as the battle over how to expand the bitcoin network continues to intensify. The issue, known as the "block size debate," has divided the bitcoin community into two camps: Bitcoin Core and Bitcoin Classic.

The current problem is that when users send a Bitcoin transaction, they need to pay more additional fees. Through bidding, Bitcoin transactions compete for block space, and high-fee transactions are processed first, while low-fee transactions are delayed.

However, many Bitcoin wallets use a hard-coded fee mechanism: 0.0001 BTC (about 4 cents). The fee determines the priority of the transaction and whether the miner will include it in the latest block. The higher the fee, the higher the priority it will be accepted.

There are signs that the current usage of regular transaction fees may not be enough for the time being, which will affect wallets using standard fees.

As a result, some low-priority transactions remain unprocessed, which in turn increases pressure on users and merchants.

For example, South American bitcoin exchange Bitex.la and peer-to-peer bitcoin trading platform BitQuick are paying more fees, and observers are pointing the finger at the bitcoin network.

“We are paying more in fees and the trades are taking longer and longer to be delivered,” Manu Beaudroit, chief marketing officer at Bitex, told reporters. “Deposits are taking a day to process and we are paying five times the [average] fees.”

At press time, data from 21.co showed that users paying the standard fee of 10 satoshis per byte would need to wait between five and 67 blocks for their transaction to be confirmed, a process that could take up to 13 hours.

For faster transaction times, 21st Century’s service recommends that fees reach 0.0023 BTC, or about 97 cents, which is a 2,200% increase in default fees.

Service interruption

BitQuick CEO Had Mubaslat said in an interview that his company is paying three to four times more in transaction fees, saying:

“More of the problem is on the receiving end, with some sellers having to wait more than 12 hours for transactions to be confirmed.”

Bram Celeen, founder of Dutch bitcoin exchange Anycoin Direct, said some users of his service had been in trouble for paying low fees.

“This has impacted our sellers as many customers send a standard or low fee when selling coins,” he said. “They are waiting longer than usual for confirmations, up to three days (for low fees), and some transactions are even being rejected.”

Celeen said that because Anycoin sells bitcoins before any transactions are confirmed, the exchange would suffer losses if the transactions were rejected.

And the trades issued, he added, have not presented any problems.

It is worth noting that some wallet providers have not been affected too much. Both BitGo and Ledger wallets offer a dynamic fee option, which means that users can increase fees in real time to respond to transaction demand.

Ledger CEO Eric Larchevêque told CoinDesk:

“Our customers were not really impacted by the spam attacks.”

But the situation has so far forced at least one merchant to publicly announce that it will stop accepting Bitcoin due to the risk of Bitcoin transactions getting stuck.

The Barrel Drop, a micro-publisher in Nottingham, England, said in a Reddit post that it would no longer accept Bitcoin payments "because there is currently a high probability that the transaction will not be confirmed."

The micropublisher said it would resume accepting Bitcoin once the situation is resolved.

Network "abnormal"

The bitcoin network has experienced a number of spam attacks in its history, including one last fall when a mysterious company called CoinWallet was allegedly seeking to demonstrate capacity issues on the bitcoin network.

What happened this week, however, seems to be different because the transactions involved all had relatively high transaction fees.

Several industry representatives interviewed also had different opinions on whether these transactions can be called "spam" because it is difficult to determine the nature of these activities.

Justus Ranvier, a contributor to the Open Bitcoin Privacy Project, said the transactions could be from a poorly designed exchange wallet or a malicious attack “aimed at destabilizing the block size debate,” but there is currently no way to determine their nature.

Avalon’s Guo Yifu told CoinDesk he believes the transactions may have been intended for coin mixing, or to obscure the transaction history of the funds by repeatedly mixing them.

A video posted to YouTube further illustrates these activities, showing that certain individuals or groups are driving up transaction fees across the network through a large number of transactions.

However, he also pointed out the fact that "the only thing it does is add burden to the network," he said.

Transaction backlog reduced

Network data suggests that congestion issues with low-fee payments may be receding (possibly as a result of network participants being forced to pay higher fees).

According to data from TradeBlock, the size of the Bitcoin network memory pool has dropped from a peak of 50 MB on March 1 to approximately 19 MB currently, with approximately 15,000 unconfirmed transactions totaling 77,000 bitcoins.

However, the incident also raises the question of whether wallet software should be programmed to allow for dynamic adjustment of fees.

BitGo software engineer Jameson Lopp told reporters that if such a mechanism becomes the norm, fewer users may see transaction congestion, but this will also lead to an increase in transaction fees.

He said:

“I suspect that if everyone used dynamic transaction fees we wouldn’t see a lot of complaints, but we would see the rise of a fee market.”

Original article: http://www.coindesk.com/bitcoin-capacity-nightmare-fees-reality/
By Stan Higgins and Pete Rizzo
Compiled by: Satuoxi
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-capacity-fees)