Bitcoin txn fee drops below $1 for the first time in 2 years

Lavina Daryanani
Source: Pixabay

Over the last three days, the Bitcoin transaction fee has been hovering below $1. Per data from Y Charts, on 20 August, the number stood at $0.85. It dropped to $0.82 on 21 August but inclined to $0.92 on 22 August. Despite the minor incline, the fee currently hovers around its two-year lows.

Transaction fee, as such, has been an essential part of most blockchain systems since inception. The amount paid usually acts as an incentive to miners who help confirm transactions and help protect the network from spam attacks.

The fee usually fluctuates depending on the network activity, and market forces play a crucial role in influencing the fee. Usually, a high fee hinders blockchain adoption and steers users away from the network. On the other hand, a meager fee raises the security alarm. Thus, on any given day, a nominal fee is preferred by users.

As seen below, Bitcoin’s fee has not fallen out of the blue, and it has been on a downtrend for quite some time, gradually making its use case as a payment channel concrete.

Source: Y Charts

Despite the low fee, it is interesting that Bitcoin has earned more than its peers like Cardano and Litecoin over the past 24 hours. Data from Messari revealed that Bitcoin made $170k via fee over the past day, while the figure for the other two networks stood at relatively lower levels—$11.7k and $735.

Source: Messari

Bitcoin mining difficulty increases

Despite the drop in fees, Bitcoin’s mining difficulty has been increasing. As seen from below, the difficulty was on a downfall since mid-May. However, since the beginning of August, things have changed. From the local lows of 27.69t, the number is already up to 28.35t.

The difficulty rising means miners are spending more computational power to get the hash value. As reported in a recent article, Bitcoin miner profitability numbers remain pretty choppy. With the rising difficulty, it is essential for Bitcoin’s price to rise to incentivize and compensate miners for the additional cost incurred while mining.