- A $3.1 million Bitcoin transaction fee has sparked concerns about the suitability of Bitcoin’s transaction fee model for everyday transactions
- This fee, sent accidentally alongside a $2 million Bitcoin transfer, mashes the previous record, surpassing the $500,000 sent by Paxos in September
- Despite Bitcoin transaction fees remaining around $10, the widespread use of Bitcoin Ordinals has emphasized the importance of relying on Layer 2 solutions like the Lightning Network
A $3.1 million Bitcoin transaction fee has stoked the fires of Bitcoin’s transaction fee model generally, with the issue of its unsuitability to everyday transactions rearing its head. The fee, seemingly sent by accident in accompaniment to a $2 million bitcoin send, is a six-fold increase on the previous record of $500,000 accidentally set by Paxos, which was repaid by the mining pool which processed it. Bitcoin transaction fees are still at the $10 mark, thanks chiefly to the popularity of Ordinals, making reliance on Layer 2 solutions such as the Lightning Network all but essential.
119,980 Times Too Much
The transaction in question occurred at 10 a.m. yesterday and involved someone transferring 55.77 BTC ($2.1 million) with a staggering fee of 83.65 BTC ($3.1 million). According to Bitcoin explorer Mempool, the user overpaid by a remarkable factor of 119,980x, given that the average transaction fee at the time was around $10.
The payment address, activated earlier on the same day, conducted three transactions before the fourth incurred this unprecedented fee. The receiving address, originating from October 16, is relatively new in the Bitcoin network. AntPool successfully mined the transaction, placing it in block 818,087, and as yet no one has come forward to admit the error.
When Paxos informed mining pool F2Pool in September that it had accidentally paid a $500,000 transaction fee, F2Pool agreed to send the funds back, although AntPool has not yet stated whether it would do the same should the sender make themselves known.
Transaction Sparks Bitcoin Fee Model
The mammoth fee has ignited the subject of Bitcoin’s transaction fees at a more general level, with some using the record-breaking fee to claim that Bitcoin’s model is not fit for purpose; they argue that it shouldn’t be possible to accidentally send such huge sums in the first place and that even a $10 transaction fee is too high for everyday use.
Bitcoin supporters argue that Bitcoin’s small blocks increase the ability for regular people to run nodes, thus increasing decentralization, as opposed to the likes of Bitcoin SV which requires a minimum 16TB SSD but recommends a 32TB system. This massively centralizes the mining of the coin to those who can afford to operate such machines.
Bitcoiners also point to technologies such as the Lightning Network which allows people to send BTC at a fraction of the cost, allowing users the choice of a Layer 2 protocol with small fees or the main chain with higher fees.