- Fees drop as dust is swept
Exchanges and wallet services have been busy spring cleaning since the last run-up.
There’s an interesting article about one of the unexpected consequences of the huge increase in price and interest in bitcoin last year: https://medium.com/@alcio/when-the-bitcoin-dust-settles-878f3431a71a
The short version is that when the price was high and there were lots of transactions, fees to transfer bitcoin were large enough that a lot of ‘dust’ accumulated. This is small amounts of bitcoin that were uneconomical to move, because the transaction fees were more than the funds in question. Some exchanges saw a vast number of such unspent outputs gather in their wallets.
@LaurentMT wrote at the time: ‘For example, this entity (oxt.me/entity/tiid/48…) is a wallet controlled by Coinbase. To date, it owns around 203 BTC split in 1,464,545 utxos ! With BTC at $15.8k, it means $3.2M with an average utxo value of 2.2$. #DustInTheChain’
No one cared much about bitcoin dust when fees were low. ‘This led to a gradual accumulation of outputs of 10,000 satoshis or less (otherwise called dust, at today’s price of $7,500, that’s $0.75 or less). At the peak, these low value outputs represented roughly a third of all unspent outputs, while storing only 685 BTC. However, once fees reach 70 satoshis per byte, it is not economically viable to spend any output whose value is less than 10,000 satoshis, as doing so costs more than 10,000 satoshis.’
One of the impacts of the price rise has been that various entities have started actively working on ensuring their wallets work efficiently. Implementation of SegWit and batching (when lots of transfers are included together in one transaction, rather than individually) has helped to bring competition for block space down. This, along with dynamic fees and better fee-selection algorithms, means that ‘fees (expressed in sat/B), are at their lowest in years’.
Enjoy it while you can! If you have lots of bitcoin holdings across many wallets, consider consolidating them and clearing out low-value addresses before competition and fees rise again — as they surely will.
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- Date of publication:
- Mon, 04/16/2018 - 07:54
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