According to BitInfoCharts, the average Bitcoin transaction fee on December 30 was $16.04 and there were several days when it was more than $30 per day at the beginning of the month.
These high rates or the predicts that the rates would be much higher and led to the development of Bitcoin Cash, a Bitcoin fork developed almost simultaneously with the separate upgrade during the summer. Bitcoin network has a larger block size limit that increases the block space supply, but it’s also a completely different Cryptocurrency network that does not have the level of liquidity.
Litecoin is an additional Cryptocurrency that has long been marketed as a less expensive alternative to Bitcoin. Its creator first named Litecoin Bitcoin Silver Gold.
So why has the price of Bitcoin gone up, despite delays in confirming less reliable transactions and higher prices when these cheaper alternatives are available?
The Cost of Getting Bitcoin As a Store of Value Is Still Low
While the use of Bitcoin as a medium of exchange in the early days of project development has often been portrayed as the riskiest use case, the asset has evolved to be more store value– not mean that the two use cases are mutually exclusive.
Instead of buying a Bitcoin to make a deal, many Bitcoin get the sole purpose of storing value or simply speculating on the price. Although the Bitcoin price has increased tenfold this year, the number of transactions processed per day has stagnated somewhat.
Gold has an effective market cap of $6 billion but is not widely used in daily transactions. The current development plan for Bitcoin is to move payments to levels beyond the Bitcoin core protocol, with Lightning Network being the best-known solution.
Those who are only interested in speculating on the price of Bitcoin or using it as a stock market need not worry about transaction fees when they are ready to let their currency go public. Someone who is interested in getting their currency exchanged only has to worry about a single fee if they want to keep Bitcoin in the long run.
Coinbase data shows that more than half of its users were interested in keeping Bitcoin and not trading between 2013 and 2016.
Bitcoin is known as Digital Gold and a new asset class that has been decorated by several people who have appeared on Bloomberg, CNBC and other major financials this year, and this story has outpaced the claims of 2013 and 2014 on Bitcoin’s favorable and make quick payments.
Bitcoin has shown its resilience against inconsistent and controversial protocol changes earlier this year when the suggestion from SegWit2x was dropped before the deadline expired. SegWit2x has been supported by some of the largest companies in the Bitcoin industry and the vast majority of miners.
In Addition To Low Transaction Costs, Liquidity Is Required
While alternative Cryptocurrency networks can offer lower transaction costs, there is still liquidity in Bitcoin, probably because it’s the longest-lasting Cryptocurrency. More liquidity leads to less slippage in the transition between the world of Cryptocurrencies and the traditional financial system, as BitPesa CEO Elizabeth Rossiello recently said when comparing Bitcoin with the Altcoin market.
As Xapo CEO Wences Casares explained, the use of Bitcoin as a source of value creates the liquidity needed for its end use as a medium of exchange.
Will It Last Forever?
Of course, some Cryptocurrency users have already used altcoins because of the high rates of the Bitcoin network. But if you are looking for an alternative value store, you are buying Bitcoin right now. The Lightning Network is an attempt to make payments on the Bitcoin base layer as digital gold but is not yet ready for general use.
At that time, altcoins are experiencing some traction, in part because of the high rates and congestion of the Bitcoin network. As the popularity of altcoins continues to increase, it depends on the development of Layer Two solutions, such as Lightning Network in Bitcoin.