The rewards halving of May saw an increase in Bitcoin transaction fees to above a $1, which was not the case in April. According to data from BitInfoCharts, a crypto analytics website, BTC transaction fees reduced by 91% from $6.65 to $0.56 between May 20 and June 14. The decrease came after a rapid increase in the fees by more than 1600% between April 5 and May 20.
The previous 2016 halving also saw an increase in transaction fees by 200% from $0.08 on May 1to $0.24 on July 31. The halving took place on July 9, and the transaction few were $0.17 and they maintained this rate roughly for two months post the halving but surged to $0.37 in October.
Comparing these two halvings, the 2020 halving has had the most effect on transaction fee because of the 1600% increase between 6 weeks.
An increase in transaction fees ensure that certain transactions are processed faster than others are. Therefore, those making quick or emergency payments will be required to pay higher fees to get their transactions processed ahead of others who pay smaller fees. The effect of this is that miners get better profits for their contribution in processing these transactions, making mining in the BTC blockchain more beneficial to miners.
Consequently, this attracts more miners to the blockchain, increasing the power consumption and leading to waste. This is because mining uses enormous amounts of computing power, and when many miners compete to process the same transaction, a lot of power is wasted.
An increase in transaction fees has a negative effect on the blockchain, as the number of users may be reduced due to higher fees. This affects the adaption rate of the crypto, as fewer individuals are able to manage the transaction fees, and the long wait for processing of transactions once one cannot afford the rate. Additionally, it might be too expensive to transact using BTC when the rates increase, as a trader might pay more by using BTC compared to cash or a bank transfer.
The increase in transaction fees affect users negatively as the amount of BTC spent is more. For regular users, a huge increase might determine their capacity to use the crypto as a day-to-day transaction currency, affecting the blockchain as a whole. In addition, it might lead to fewer transactions, as users shift to other cheaper and faster networks where they can save their crypto and have all the benefits of the blockchain.
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