Learn how we found out the Bitcoin Network could've saved more than 500 000 000$ (five hundred million) US dollars.
Rising Bitcoin fees are inevitable as the desire to transact increases, given a limited amount of space available for those transactions in any given block. This desire to transact often coincides with an increase in the fiat value of Bitcoin, like we’ve seen near the end of 2017 with transaction fees reaching nearly $40 USD, or more recently with fees nearing $6 around the time of Bitcoin’s 3rd halving, up from about $0.4 in April.
This can be especially problematic for service providers, such as exchanges, casinos or any other organization transacting regularly on behalf of their customers. There are methods available that allow for users to save on fees, two of those methods have been analyzed in our case study: Transaction Batching and SegWit.
We have collected information such as block weight and fees paid since 2012. The possible savings that the transactions in those blocks would have benefited had they utilized SegWit and the savings for the transactions that could have been batched, but have not, have been calculated.
We have built upon Nic Carter and Hasu’s work conducted in 2018 and have adapted David Harding’s formula for detecting whether there’s multiple transactions with matching input prevout for our Batching analysis (our code is found here). The results we found are significant:
Currently, around 45% of transactions are done using Segregated Witness. Using Blockstream’s Esplora API, we have collected information on the blocks since its implementation on the 24th of August 2017. We have gone through every input of every transaction and if the input wasn’t a SegWit Native one, we calculated the amount of block weight that could have been saved, which can then indicate the amount of fees that could have been saved.
We have found the following:
As you can see, a full implementation of these two methods would have helped users prevent overpaying nearly half a billion dollars in network fees. Bitcoin network fees are a crucial and inevitable expense that all Bitcoin users, particularly companies, have to deal with.
In the long-term, we only see this cost increase as demand for Bitcoin and its blockspace grow.
Successful enterprises will be those that manage this ever increasing cost through strategies that leverage innovations such as leveraging SegWit, Payment Batching and much more.
We invite you to read the analysis in its entirety, here. If you have any questions about the technologies mentioned above and how to implement them in your organization, or have a case study in mind that you would like to have done, feel free to reach out to us or book a call!