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Bitcoin and Ethereum Networks See Heightened Fees as Crypto Usage Soars

Both the Bitcoin (BTC) and Ethereum (ETH) networks have witnessed a significant spike in transaction fees due to the increased use of cryptocurrencies.

As per data from BitInfoCharts, the average transaction fee for BTC has surged to approximately $10, marking a more than 500% increase from the level of less than $2 earlier this month. It’s noteworthy that on October 16 and 18, the average BTC fees reached as high as $18, aligning with a surge in the value of the leading cryptocurrency and an increase in trading volume.

This rise in transaction fees is often a result of heightened demand for network resources, leading to increased competition among users to have their transactions processed in a timely manner. Such fluctuations in fees are characteristic of periods of increased activity and interest in the cryptocurrency markets.

The surge in transaction fees extends to the Ethereum network as well, with gas fees exceeding 100 gwei, as reported by EtherScan. Presently, it costs users over $60 to make a swap on the Ethereum network, approximately $110 to sell a non-fungible token (NFT), and $20 to bridge assets.

Additionally, data from CryptoFees indicates that Bitcoin’s daily fees averaged $10.65 million from November 16 to November 18, surpassing Ethereum’s average fee of $6.9 million for the same period. This data underscores the increased cost of utilizing these blockchain networks, likely driven by heightened demand and activity within the cryptocurrency space. Such fee dynamics can impact user behavior and influence network preferences, especially during times of increased market activity.

Rising Bitcoin Fees Attributed to Ordinals

The recent surge in Bitcoin (BTC) transaction fees has been linked by some market analysts to the resurgence of Ordinal Inscriptions. These digital assets, similar to non-fungible tokens (NFTs) but based on BTC’s smallest denomination, satoshis, gained attention earlier this year, marking Bitcoin’s entry into the NFT sector.

Although interest initially waned as the market landscape evolved, there has been a revival in interest as Ordinal Inscriptions expanded beyond the Bitcoin network to other blockchains such as Polygon and Litecoin. This broader adoption has contributed to increased activity and transactions, subsequently impacting transaction fees on the Bitcoin network. The interaction between innovative assets like Ordinal Inscriptions and transaction dynamics can influence fee levels in the cryptocurrency ecosystem.

In May, the growing popularity of Ordinals caused network congestion, resulting in a staggering 500,000 unconfirmed transactions and a significant surge in the average transaction fee on the Bitcoin network. In response to this incident, some Bitcoin developers proposed potential solutions, with one suggestion being to release an upgrade to address the issues associated with Ordinals.

During discussions on a Bitcoin developer forum, Ali Sherief, a Bitcoin core developer, proposed the introduction of a runtime option. This option would involve deleting all non-standard Taproot transactions, encompassing Ordinals and BRC-20 tokens. Such discussions reflect the ongoing efforts within the Bitcoin development community to address challenges related to network congestion and the impact of specific assets or features on transaction processing.

Bitcoin Adoption on the Rise

The recent increase in Bitcoin (BTC) transaction fees coincides with a broader trend of growing adoption of the leading cryptocurrency. According to a report from IntoTheBlock, Bitcoin adoption has reached 67.62%, marking a new yearly high.

This surge in adoption is evidenced by an increase in the number of newly created active addresses, suggesting a notable influx of new participants into the market. The rising interest and participation in Bitcoin underscore its continued relevance and appeal within the broader financial landscape. As adoption expands, it can contribute to increased network activity and, consequently, higher transaction fees.

In addition to the surge in Bitcoin adoption, the volume of BTC held by long-term investors has reached an all-time high, with more than 1 million addresses owning more than 1 unit of Bitcoin. Santiment, a blockchain analytics firm, has also corroborated these findings, highlighting an increase in smaller wallets with less than 1 BTC.

Santiment observed fluctuations in Bitcoin’s wallet distribution during the significant market-wide surge. Notably, there has been an influx of new smaller wallets holding less than 1 BTC. Meanwhile, the distribution in the 1-100 tier has stabilized, and there are indications that the 100+ tier may be experiencing some profit-taking, suggesting a dynamic shift in Bitcoin ownership patterns during this period of heightened market activity.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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