A new research paper reveals that the cryptocurrency futures exchange BitMEX has heightened trading costs for all on the Bitcoin network.
BitMEX Increases Transaction Costs on the Bitcoin Network
The price of carrying out transactions on the Bitcoin network is increasing every day for an hour, around mid-morning New York time. It does so all over the world before returning to normal. According to researchers, the primary cause of this increase in transaction fees is the cryptocurrency derivatives platform, BitMEX.
The study released by OxB10C indicated that the tools used by the trading site are the reason why trading costs are higher. Researchers proposed that if BitMEX was to employ more reliable methods when transmitting transfers, it would save consumers around the world 1.7 Bitcoin (worth more than $15,000) in charges per day. This amounts to a minimum of 7% of the overall daily fees charged on the Bitcoin network, OxB10C said.
Regular exchange of transactions has a huge effect on the Bitcoin network and the fees paid by consumers. According to OxB10C, the discovery that BitMEX broadcasts transactions every day at about 13:00 UTC is not new. Transactions are typically withdrawals from customers of BitMEX and other internal UTXO consolidations. BitMEX’s wallet management procedure has them checking and handling all withdrawals by hand. According to BitMEX, it would not be possible to do this multiple times a day. They argued that while the daily spread of the transaction would reduce the burden on the network, it would also reduce the user’s experience.
Whenever a user initiates a BTC transaction, a small fee is added. Fees fluctuate at all times, based on the extent of congestion on the Bitcoin network. This is because there is little space for transfers to be carried out. If there are so many transactions at the same time, miners prefer to concentrate on those with higher charges and leave lower fees waiting.
Because BitMEX broadcasts thousands of transactions every day at 13:00 UTC, there is a massive increase in trading fees over that period, OxB10C concluded. OxB10C also noted that the results of sending multiple megabytes of automated transactions lead to a significant rise in the fee rate suggested by estimators and payed by consumers. BitMEX’s operation has been going on since September last year.
OxB10C was able to gather this information using the Bitcoin Transaction Monitor they created. It is a data method for analyzing transactions on the network in depth.
Bitcoin Wallets Use Fee Estimators
Most Bitcoin wallets have built-in calculations that measure the fees the customer will pay to ensure that the transaction is done easily on the Bitcoin network. When a huge number of transactions are carried out by the network and the cost is small, it appears to take longer to complete the transactions.
Since BitMEX transactions are going through at once, the Bitcoin blockchain is being blocked, leading estimators to increase their fees and users to have to pay for it.
While users prefer to pay lower fees, higher fees seem to improve the protection of the Bitcoin network, particularly when block rewards decrease every four years, OxB10C argued. The next halving of mining incentives is arriving in a week, and long-term questions about the stability of the Bitcoin network have been illustrated.
Developers and followers of Bitcoin have urged major crypto exchanges and wallet providers to introduce scaling techniques that would minimize fees and enable the network to operate more effectively. Some of these innovations include Segregated Witness, or SegWit, a scaling update that has been open to the Bitcoin ecosystem since 2017.