Bitcoin Just Hit $1 Billion in All-Time Transaction Fees
On Oct. 30, 2019, the bitcoin blockchain reached $1 billion in cumulative transaction fees.
“This milestone is a really cool milestone just because it shows how much people value block space,” said Bryan Aulds, founder of bitcoin wallet Billfodl. “And that it’s something people don’t mind paying for, which I think is really important moving forward.”
According to data from blockchain analytics startup BlockChair, the amount of bitcoin transaction fees collected annually has actually decreased in recent years. This is due to the advent of scaling solutions on bitcoin including “Segregated Witness” and the Lightning Network.
And while the cumulative amount of bitcoin transaction fees converted to USD amounts to roughly $1 billion, the amount is actually much larger if you consider the market value of bitcoin today. According to Coin Metrics data, 204808.3479 BTC has been doled out in transaction fees to miners since 2009. At today’s price, that’s equivalent to $1.86 billion.
The cumulative size of transaction fees on the bitcoin network is only set to grow larger in the coming years – especially as alternative mechanisms for rewarding miners such as block subsidies gradually decline.
“Over the long run, the transaction fees will eventually have to replace the block [subsidy],” said Jameson Lopp, CTO of bitcoin management startup Casa.
Securing the bitcoin network
Stepping back, transaction fees play three key roles on the bitcoin blockchain – all of which serve to secure the integrity and censorship-resistance of the network.
First, attaching fees to bitcoin transactions discourages denial of service attacks, also called “spam” attacks, from slowing down the network.
“When you create a transaction, you’re able to use bandwidth and write data onto the hard drive of anyone running a node on the network,” said Lopp. “If there’s no cost to doing that then you can saturate everyone’s bandwidth and fill up everyone’s hard drive.” Second, fees serve to prioritize which transactions get confirmed and written onto blocks faster than others.