On March 21, Coinbase officially discontinued paying miner fees on behalf of its users. Xapo, a Switzerland-based bitcoin wallet, payment and vault service provider, is following other leading bitcoin businesses such as Coinbase and Bitpay to encourage users to pay miners fee for their outgoing transactions.
In an email to its clients, the Xapo team announced:
“In the next couple of days, all Xapo users will begin to pay the miners fee themselves in order to send transactions out of Xapo. No portion of this fee goes to Xapo, it is simply the fee that needs to be paid to miners in order for an outgoing transaction to be processed via the bitcoin network. This fee will be dynamically calculated based on the current network conditions and will be paid by you at the time of the transaction.”
Over the past four months, the average size of the mempool, the holding area wherein unconfirmed bitcoin transactions are stored, has increased significantly, due to the increasing average block size that is at 0.98MB, which is only a few megabytes away from the maximum Bitcoin block size of 1MB.
Due to the Bitcoin network’s scalability issues and the delay in the activation of scaling and block size increase solutions, the fee market has grown exponentially since May of 2016. Last year, the number of daily transactions averaged at around 130 million. By May of this year, the number of average daily transactions increased to around 230 million.
Despite such rapid growth in user base and market cap, Bitcoin is struggling to scale. Such issues in scalability have provided bitcoin businesses like Xapo with no other viable option but to ask users to pay for their own miners fee.
According to Bitcoin Fees, a transaction fee estimator developed by 21 Inc, the recommended fee for average-sized transaction is $1.46. Only a few months back, Bitcoin Fees recommended a fee of $0.4. Within a period of three months, the recommended fee for bitcoin nearly quadrupled.
More to that, Bitpay’s co-founder and CEO Stephen Pair released a chart which demonstrated the increase in the miners fee paid by Bitpay. The chart showed that Bitpay nearly paid $60,000 in February for its clients.
The Xapo team plans to provide users with various options in regard to fee estimation. It aims to use an appropriate fee estimator to enable users to pay high fees for urgent transactions and low fees for unimportant payments.
“Due to the increase in transaction volume of the bitcoin network, we’d like to give our users some control over their transactions. That being said, Xapo will give you the ability to select which types of fee you’d like to pay, thus allowing you to choose how quickly you’d like for your transaction to be processed,” the Xapo team said.
In the past week, Trezor had some issues with its third party fee estimation service provider and as a result, Trezor users were recommended a fee upwards to $500. Speaking to several users of Blockchain, The Merkle has also learned that users of Bitcoin’s largest wallet service provider also had issues with Blockchain’s fee estimator as it disregarded transaction size whilst recommending fees.
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