The best of times and the worst of times
There are good news and bad news. The good news is that the number of people utilizing the Bitcoin network has steadily been increasing. As Bitcoin enthusiasts, we are excited to see the proliferation of people using bitcoin and blockchains in new and interesting ways, from payments to permanent records to enabling decentralized applications.
The bad news is the number of people utilizing the Bitcoin network has been steadily increasing, all the way up the the block size limit. Some of our earlier predictions have begun to unfold as transaction fees increase and confirmation delays mount. These are basic economic assumptions of supply and demand.
In the last 72 hours the cost to confirm a transaction in the next block (about 10 minutes) has increased around 120% to about $0.12 USD. Our Chief Scientist, Brian Deery, was warning that there wouldn’t be enough capacity within bitcoin to support all the amazing use cases people were thinking up at that time. Two years later, the idea of using a blockchain has become a craze for governments and large corporations, with many new startups entering the space to meet this ever increasing demand.
Beyond the cost increase, the wait times to get your transaction confirmation in a block, at the old fee rate, has increased to between 4 to 6 hours. This puts transactions offering lower fees at risk of long confirmation delays, or not confirming at all. The graph below shows how long transactions are delayed in relation to the fee they are offering to miners. You may note that zero fee transactions are no longer being processed.
We have seen large jumps in transaction volume before, however they were linked to attacks on the network related to the Bitcoin Civil War. The September, 2015 “stress test” on the network by the mining service CoinWallet are good examples. The graph below shows the jump.
But this event appears to be different, in that it’s being driven by organic growth in transactions. This has begun to create a dilemma for those that wish to utilize the security of the Bitcoin network and have use cases where they need to create hundreds or thousands of transactions. With an effective limit of about 250,000 transactions per day (1 MB block size) within the Bitcoin network, Factom offers a simple solution that allows for the same level of “on blockchain” security at a cost 130 X cheaper and without delay. Given the ever increasing popularity of Bitcoin, and the persistent block size limits, it is likely that the cost will only increase over time.
Factom’s cost for security remains constant with balancing algorithms keeping the cost per entry at $0.001 USD. Factom is able to maintain the same on chain security by anchoring into Bitcoin every 10 minutes. Check out the Factom’s Explorer or if you would like to begin testing the scalability of Factom, check out our developer sandbox.
Make no mistake, we are bullish on the future of Bitcoin and the ever expanding use cases for blockchain technology. However a major shift in the economics of securing data to the blockchain is now underway and it’s worth while to understand that change and learn about tools that offer a path forward, toward massive secure blockchain scalability.