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Bitcoin Fees Drop: Why It Happened And What It Means Posted on : Feb 23 - 2018

$26 down to $3.

The average cost of sending a bitcoin transaction is cheaper than it's been in a year and a half, showing the price isn't the cryptocurrency's only unpredictable metric these days.

But with all the debate about growing fees, this might come as a surprise. After all, it wasn't so long ago that fees were so high a group of prominent investors and miners created a whole new version of bitcoin mostly to keep fees lower.

Backing up a bit, much of the conflict centered on the fact that while called "fees," these expenses are best considered as transaction costs that are necessary to the network, as necessary as paying for someone to deliver a protocol service, be it SMS, VoIP or email, or even a pizza.

This is because bitcoin is a software that requires all of the many thousands of computers that run it to stay in sync. To do so easily, there's a limit on how much data the network can process at intervals, and users need to pay more to get their transactions in at times of congestion.

So, as bitcoin grew more popular in the last year, fees skyrocketed to over $25, according to a graph from data website Bitinfocharts.

Bitcoin users, those who truly rely on the protocol for essentials, have been affected by this, as were those who believed bitcoin could be competitive with legacy payment systems.

But, bitcoin fees have fizzled out, declining since the end of December.

So, why did fees take a nosedive? The simple answer is users are making fewer transactions right now. In December, there were roughly 400,000 transactions per day, while today bitcoin is seeing only 200,000, according to data from Blockchain.info.

"I think its really simple," BitGo engineer Mike Belshe told CoinDesk. "There is substantially less transaction demand."

The question, he added, is why has there been a decrease in transactions?

SegWit and beyond

If Twitter and Reddit are any indication, sentiment on the matter tends to be influenced by personal politics, in this case, where users stand in bitcoin's long-standing block size debate, which, at its core, was about network economics. View More