Our experts named the reasons for the large “queue” of transactions in BTC network. And described the ways to solve this problem, as well as its impact on the price of the leading digital asset.
At the beginning of May, the daily number of transactions in Bitcoin network renewed its historical maximum at 685 thousand. This happened amid a surge of activity associated with the issue of bitcoin-NFT or Ordinals.
The ability to issue tokens on the Bitcoin network appeared in late January. And since then more than 4.69 million of them were created. More than 789 BTC ($21.9 million) were spent as commissions.
As of May 8, there are still more than 455,000 transactions waiting to be confirmed in the first cryptocurrency blockchain. Which is a record high. Experts told what the formation of such a queue could lead to.
Reasons and solutions
Queuing is a fairly typical situation for PoW blockchains. And many factors can affect it, but the main reason is always associated with a sharp increase in interest in intra-network transfers.
Our experts say that the problem develops further very quickly. As the queue generates an even bigger queue, similar to the traffic jams that form from traffic jams when people try to avoid them. In blockchains, users start to raise fees. And all new transactions get stuck, while old ones may stay in the mempool (transaction queue, mempool) for weeks until the load is reduced.
There is no direct solution to this situation, says our expert. In general, the “scalability problem” is the main reason to criticize the consensus mechanism Proof-of-Work (PoW), on which Bitcoin works. But our expert noted that there are local ways around this problem. For example, such as “replace-by-fee” or “child-pays-for-parent” mechanisms.
“Replace-by-fee” allows you to directly change the amount of commission in a transaction already sent to the waiting list. But very few wallets support this feature. And to enable it, it should have been provided for in advance: the transaction should have been sent with the parameter enabled. Which allows you to replace the commission already after the transaction has been sent.
The “child-pays-for-parent” function implies sending a new transaction from a wallet. To which the change from the previous transaction with the knowingly overrated commission must come. This is such that it would be profitable for miners to process two transactions at once.
The problem of scalability is partially solved by the use of L2 solutions. For example, there is a Lightning Network superstructure for Bitcoin, which does not load the main blockchain. The widespread implementation of this technology will help prevent queues in the future.
Impact on Bitcoin price
The current significant queue in the BTC network is unlikely to affect the value of the asset in the moment. But it does create a number of questions for what is happening around the Bitcoin blockchain.
If before the BTC network seemed to market participants something fundamental, stable, which is very difficult to change. And, as a consequence, difficult to deteriorate in its parameters. After the emergence of projects like Ordinals, Bitcoin no longer seems to be a cryptocurrency ” constant.
The fact that thousands of enthusiasts in the Bitcoin network can now create NFT using the experimental script BRC-20. This expands the capabilities of the project, but creates no additional value for BTC. Our expert noted that the Bitcoin blockchain has never been known for scaling as it is. And in times of stress and strong movements of the cryptocurrency market, transactions in the network, compared to other blockchains, were very slow at all.
Now, against the backdrop of a growing number of transactions. And at the moment the number of transactions “in the queue” exceeded 400 thousand, the network’s fees have also increased, which adds to the negativity.
Thus, over time, the perception of Bitcoin as the first asset of the market may shift towards other projects. Which will offer reliable, fast and profitable transactions. Thus, the events of today may lead to a decrease in interest and capitalization of BTC in the long run.
However, there is no clear competitor at the moment. Therefore, market participants will continue to use Bitcoin. Current price movements are unlikely to be affected by these processes. But in the long term, such an “evolution” of the Bitcoin network raises questions.