On-chain data shows the Bitcoin daily transaction fees jumped 35x during 2023, leading to BTC flipping Ethereum in the metric.
Bitcoin Daily Transaction Fees Has Shot Up Recently
According to data from the market intelligence platform IntoTheBlock, the BTC transaction fees have hit new highs in 2023. The “transaction fees” here naturally refer to the amount that any sender has to attach with their transfers on the Bitcoin blockchain as payment for the miners.
The average fees that the users would be willing to put on their transactions depend on the network conditions. When a large number of users make transactions at once, some transfers can get stuck waiting in the mempool, as the chain only has a limited capacity to process moves.
If a sender doesn’t want to risk having to wait sometime, they will go for higher-than-average fee so that the chain validators prioritize their transaction. In times of especially high traffic, the average fee can blow up to high levels as investors compete against each other to be the first through the mempool.
On the other hand, the transaction fee stays low in times of relative calm on the blockchain, as users have little incentive to attach any significant amounts to their moves.
Now, here is a chart that shows how the daily average transaction fees have changed for Bitcoin, as well as for Ethereum, over the year 2023:
Looks like the two metrics have crossed each other recently | Source: IntoTheBlock on X
As displayed in the above graph, the Bitcoin transaction fees have observed a sharp uptrend during the past couple of months or so and have shot up to new highs.
The transaction fees on the network have also surpassed that on Ethereum recently, meaning that it’s now more expensive to make moves on the BTC blockchain than on ETH.
Ethereum’s fee itself has also been rising recently, albeit more gradually. The reason behind these growths is the fresh rally that the cryptocurrency sector has witnessed in this period.
Sharp price rises usually bring a lot of eyes on any asset, and with such attention naturally comes transaction activity on the blockchain, as fresh investors come in and old ones reposition themselves.
For Bitcoin, though, the rally is only partially the factor driving the transaction fee growth. The recent boost in interest around Inscriptions is what has led to the asset showing sharper growth than Ethereum in this metric.
Inscriptions, a class of transactions that directly inscribes data into the blockchain (hence the name), influence the economics of the blockchain in much the same way as any other transaction.
As the Inscriptions have become quite popular lately, the network has become more congested than usual, which is why the transaction fees have shown an extraordinary increase. In all, the Bitcoin transaction fees have jumped 35 times over the year 2023.
At the time of writing, Bitcoin is trading at around $42,500, down 2% in the past week.
The price of the asset seems to have already retraced its latest recovery | Source: BTCUSD on TradingView
Featured image from Aleksi Räisä on Unsplash.com, charts from TradingView.com, IntoTheBlock.com