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Research: Debunking the FUD surrounding Bitcoin transaction fees

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Research: Debunking the FUD surrounding Bitcoin transaction fees

Research: Debunking the FUD surrounding Bitcoin transaction fees Andjela Radmilac · 20 mins ago · 3 min read

Bitcoin transaction fees are the lifeblood of the Bitcoin network and are what secures the network both in the short-term and in the long-term.

3 min read

Updated: September 23, 2022 at 3:44 pm

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Cover art/illustration via CryptoSlate

Bitcoin FUD comes in all shapes and sizes, ranging from unbridled energy consumption to rampant crime.

Since 2017, the World Economic Forum has been warning that Bitcoin will eventually consume more power than the entire world. Governments around the world have been campaigning against Bitcoin mining and warning about its effects on climate change.

Regulators have also been waging a war against Bitcoin. Law enforcement agencies and central banks claim it’s not a secure network as it’s vulnerable to attacks and manipulation while providing infrastructure for money laundering and crime.

However, all of these claims are not only unfounded but also completely false.

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While they could be disputed in numerous ways, Bitcoin transaction fees provide the simplest explanation.

Bitcoin transaction fees are the lifeblood of the Bitcoin network and are what secures the network both in the short term and in the long term.

Those critical of the network fear that as block subsidy reduces with each halving, the fees alone won’t be enough to keep miners from switching off their machines. Miners leaving the network en masse would drastically reduce the network’s speed and leave it highly vulnerable to attacks.

These claims are highly hypothetical and equally unlikely. The security of the Bitcoin network has remained strong since its inception over a decade ago. None of the major events the network has experienced have so far managed to make a crack in its security foundation.

In 2017, the network saw one of its first major congestion issues as Bitcoin made the run toward $20,000. Transaction fees spiked to their all-time high as a massive sell-off was taking place. Once a correction began, transaction fees began to drop considerably, leaving many to wonder whether such a sudden drop in miner revenue could impact the network.

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Since 2017, the Bitcoin network has settled trillions of dollars worth of transactions with just a fraction of the fees. Throughout 2022, miner fees have remained relatively consistent. As the Lightning Network and SegWit become more widely used, congestion will become an even rarer occurrence.

Total transaction fees on the Bitcoin network from 2010 to 2022 (Source: Glassnode)

Those concerned about the security of Bitcoin believe that it’s only a matter of time before it experiences an attack.

However, any type of attack on the Bitcoin network would unquestionably lead to a significant spike in fees in the mempool. Users would begin competing for the next block with higher and higher fees, making it more expensive for the attackers to take control of the network.

This is evident in the huge spike that occurred during the Terra (LUNA) collapse in May this year. The total amount of transaction fees waiting in the mempool increased by over tenfold as users began racing to sell their Bitcoin before it dropped too low. Those willing to pay higher fees saw their transactions processed and losses curbed, while those whose transactions got stuck in the mempool were forced to wait for the congestion to clear.

Total amount of Bitcoin fees in the mempool from November 2021 to September 2022 (Source: Glassnode)

This is a testament to the security of the network. Transaction fees are the lifeblood of the network that keeps it running and the defense mechanism that keeps it secure even in times of high volatility.

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Bitcoin

Bitcoin Price Climbs Upward With Trading Volume At A 3-Month High

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Bitcoin Price Climbs Upward With Trading Volume At A 3-Month High

Just in the past 24 hours, the crypto market was practically in green, with several assets reclaiming some values, including Bitcoin. But the trend has suddenly reversed to a negative direction. As a result, the majority of the crypto assets in the market have declined drastically.

Bitcoin has crashed from its height of over $20,000 in today’s trading hours. The token lacked the necessary support to remain at its higher level. After crossing the $20K boundary, BTC later fell to around $18,770 in the early trading hours of today. This was through a decline of over 6% in its value.

Recall that Bitcoin recorded a massive growth of more than 5% yesterday. This drove its market cap to sit above $386 billion. Also, its dominance over the altcoin almost hit 40%.

Other crypto assets were not left out during the bullish trend of last Tuesday. Most of the tokens swell bigger in the green. This growth spiked the overall market cap to almost $1 trillion through a massive gain of over 40 billion in one day.

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Price Decline For Bitcoin And Broader Crypto Market

In the early hours of trading today, Ethereum went below the $1,300 level after losing about 7%. Other significant altcoins also dipped in their values but are now trending upwards.

At the time of writing, BTC is trading at $19,362, indicating a minor over the past 24 hours. Subsequently, its market cap dropped to $365.8 billion. As a result, Bitcoin’s dominance over the altcoins decreased by 0.38% in the past 24 hours to 39.46%.

Bitcoin recovers above $19,300 l BTCUSDT on Tradingview.com

But despite its price fall, BTC trading volume has surged. Currently, its 24-hour trading volume sits at over $57.8 billion. This marked a 3-month high for the primary crypto asset.

An on-chain data firm, Santiment, explained the pump and dump situation. It stated that the market is experiencing an increase in trading volumes, especially Bitcoin, amid price decline. The spike in trading volume has been gradual within the year following its lowest in late January. Also, it cited that the BTC price peaked on Tuesday, which came since June 14.

Impact Of Macro Factors On Crypto Assets

With the rising inflation rate, macro factors have been pulling the crypto assets down. This situation turned negative for the US equities, with bonds, stocks, and commodities battling volatility.

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For some period, Bitcoin and the entire crypto wade off the pressure from their correlation with the US equities. But they couldn’t sustain it. Hence, the global macro factors, through high-interest rates and other influences, are currently affecting Bitcoin and other crypto assets.

Featured image from Pixabay, Chart: TradingView.com

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Analysis

Bitcoin, Ethereum Technical Analysis: Market Volatility Remains High, As BTC Climbs Above $19,000

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Bitcoin, Ethereum Technical Analysis: Market Volatility Remains High, As BTC Climbs Above $19,000

Volatility in cryptocurrency markets remained high on Thursday, as markets began to consolidate following a recent red wave. Bitcoin was back above $19,000 in today’s session, with ethereum also rebounding following recent losses. As of writing, the global crypto market cap is up 2.43%

Bitcoin

Bitcoin (BTC) was trading higher on Thursday, as crypto markets marginally rebounded following yesterday’s sell-off.

The token rose to an intraday high of $19,688.34 earlier in today’s session, less than a day after trading at a low of $18,927.12.

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Volatility in bitcoin has been heightened in recent weeks, as markets reacted to rising inflation, as well as a stronger U.S. Dollar.

BTC/USD – Daily Chart

Looking at the chart, it appears that bulls are once again targeting a resistance point of $20,300, however they could face some obstacles in recapturing this point.

The obstacles will likely come in the form of the 14-day relative strength index (RSI), which is nearing a resistance of its own at 49.50

Currently, the index is tracking at 46.38, with BTC falling from earlier gains, and as of writing trading at $19,440.82.

Ethereum

Like bitcoin, ethereum (ETH) was, relatively speaking, also back in the green in today’s session, as it moved above $1,300.

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Wednesday saw ETH/USD slip to a bottom of $1,267.87, however this was short lived, with bulls taking the token to a high of $1,351.96 earlier today.

The move sees the world’s second largest cryptocurrency race past a resistance of $1,330, however volatility in the market still remains.

ETH/USD – Daily Chart

Since hitting earlier highs, ETH is now trading at $1,334.94, with traders attempting to keep the token from falling below the floor mentioned above.

This coincides with the RSI hitting a ceiling at the 41.00 level, which has led to an increase of price uncertainty.

If price strength moves beyond this level, then we could see ethereum continue to climb heading into the weekend.

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Do you expect further declines from ethereum in the coming days? Leave your thoughts in the comments below.

Eliman Dambell

Eliman brings an eclectic point of view to market analysis, he was previously a brokerage director and retail trading educator. Currently, he acts as a commentator across various asset classes, including Crypto, Stocks and FX.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Bitcoin

Lightning Labs release new update to allow assets to be sent over Bitcoin’s network

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Lightning Labs release new update to allow assets to be sent over Bitcoin’s network

Lightning Labs release new update to allow assets to be sent over Bitcoin’s network Oluwapelumi Adejumo · 4 hours ago · 1 min read

When completed, the Taro protocol will allow users to issue and mint assets such as stablecoins on Bitcoin and transfer them via Lightning Network.

1 min read

Updated: September 29, 2022 at 12:49 pm

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Cover art/illustration via CryptoSlate

Lightning Labs has released the initial code for the Taro protocol that will allow developers to mint, send, and receive assets on the Bitcoin blockchain.

The developers described the development as the first step toward “bitcoinizing the dollar.” The new code release would allow the community to test the code and give valuable feedback that would be used for further improvements before its launch.

According to Lightning Labs, Taro would enable users to “have USD-denominated balances and BTC-denominated balances (or other assets) in the same wallet, trivially sending value across the Lightning Network just as they do today.”

When completed, the Taro protocol will allow users to issue and mint assets such as stablecoins on Bitcoin and transfer them via Lightning Network.

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Meanwhile, the developers did not reveal when the final product would be launched.

Lightning Labs first announced it was building the Taro protocol in April and was able to raise $70 million for the project. The Bitcoin-focused company built a layer2 solution -Lightning network- for Bitcoin that improves the blockchain network’s scalability.

Community hyped

The Bitcoin community couldn’t hide their excitement about the new development as many hailed Lightning Labs for the progress.

This is huge.

— Dan Held (@danheld) September 28, 2022

Allows you to create assets that can be sent through the highly efficient lightning network. Concrete example: you can receive and spend USD over lightning instantly and at negligible fees while using the security and decentralized nature of bitcoin’s network.

— Bitcoin LightningNetwork+ (@BTC_LN) September 29, 2022

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Bitcoin Isaiah pointed out that sending stablecoins over BTC would be “instant and nearly free over Lightning.”

Instant and nearly free over Lightning. And the same could be said the other way around. What’s the added value of Ethereum vs. sending stablecoins over Bitcoin?

— ₿ Isaiah⚡️ (@BitcoinIsaiah) September 28, 2022

Posted In: Bitcoin, Layer2

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