Bitcoin’s blockchain is really overloaded right now. To illustrate the situation, it is worth looking at the so-called mempool, that is, the queue of unconfirmed transactions. Transfers go to the mempool after transactions are broadcast to the network, after which they wait there for confirmation by the miners.


The logic behind a mempool is simple. Since miners are primarily interested in maximising their income, they are the first to select those transactions for confirmation that have a higher commission. Accordingly, the more the user pays for his transaction, the faster the transfer will be done. And if the queue turns out to be large, you have to pay more.


Today there are over 448,000 transfers in Bitcoin’s unconfirmed transaction queue. This is a very large number and indicates that the blockchain is severely overloaded.

Still, the technical capacity of the Bitcoin blockchain is very limited. It can handle about 5-7 transactions per second, resulting in about 3,000 to 5,000 transactions in each block that is created every ten minutes on average. Here is the actual data.

It turns out that it will take the network about twenty hours to “clear” the mentioned amount of transfers – and that’s assuming that no new transfers are added to the mempool. And of course they will be added.

Against this backdrop, the average transfer fee has risen considerably. Users are forced to increase this amount to be among the first to confirm a transaction.

Here is a graph of the number of transactions in Bitcoin’s mempool with different commission levels. Going to red means a significant increase in commissions – and there are a lot of such transfers right now.

For a quick transaction today you have to pay the equivalent of $23 in BTC. Naturally, many users can’t afford to spend that much – especially if they have a couple or three transfers to make.

And here’s a chart of the average Bitcoin network fees over the past year. Yesterday the figure was $19.

Why Bitcoin fees are so high

The cause of Bitcoin or Etherium network congestion is always excessive user activity. These blockchains can handle a relatively small number of transfers: 5-7 transactions per second for Bitcoin and 13-15 transfers per second for Etherium.

So when tens of thousands of users abruptly start making transfers – for example, when a new trending NFT collection is launched or an airdrop is handed out – a queue of transactions forms on the network. Of course, no one wants to stand in the queue for several minutes or hours, so users start to raise fees. Because everyone is doing so, the increase in fees is very sharp, fast and painful.


For example, this morning on the Etherium network it was priced at 130-140 gwei. Because of this, a quick ETH transfer cost the equivalent of $5, while exchanging tokens on the Uniswap decentralized exchange would cost about $50.


Moreover, today someone even managed to pay as much as 64 ETH or $118 thousand on the Etherium network for exchanging coins on the decentralized exchange. Why one would quote such a high fee is unknown. The possibility of mistakenly stating the cost of gas manually is not excluded here, as it has happened before.

And while in Etherium the commissions have grown to a record over the last year because of meme-coins like PEPE, in Bitcoin the main trend right now is the NFT analogue based on the Ordinals protocol.

What are Ordinals in the Bitcoin network

Simply, Ordinals is a protocol for numbering satoshi, the smallest indivisible part of Bitcoin, equal to 0.00000001 BTC. That means, each of them is assigned a certain serial number, which allows to track further transactions with them with the help of UTXO system, which we are already familiar with. We are talking about the output of unspent transactions, which is the basis for bitcoin transfers.

It is also possible to attach certain data to each of the satoshi, be it text, image or video. The result is a unique “token” with a certain feature in the Bitcoin network, which is essentially a replacement for NFT in other blockchains.


It is important to note that interacting with NFT in the Bitcoin network is quite complicated and is only recommended for advanced users with a good understanding of how UTXO works.

For example, in the case of Ledger hardware wallets, a separate account is required to store each Ordinals. This is to ensure that the bitcoins do not get mixed up with each other, and expensive NFT is not accidentally sent along with a regular bitcoin transfer.


The Ordinals protocol went live in January 2023 and has since become incredibly popular. Specifically, 400,000 new NFTs based on Ordinals were created on the Bitcoin network yesterday. This is a record for the rate on a 24-hour scale.

The total number of such unique satoshis now exceeds the level of 4.6 million units.

There are important differences between NFT and Ordinals in the Bitcoin network. Specifically, NFTs based on popular blockchains like Etherium and Solana operate on the basis of smart contracts. Ordinals, on the other hand, involve adding information in the form of text or images directly to the satoshi itself, which is then added to blocks in the cryptocurrency network. Consequently, NFT in the Bitcoin network relies solely on the blockchain, rather than "middlemen" like a sidechain, contract or individual token.

The growing number of NFTs in Bitcoin is facilitated by the popularity of tokens of the so-called BRC-20 standard. This is the counterpart of ERC20 tokens in the Etherium network, through which users can create new tokens based on the Etherium blockchain.

There are 14,000 such BRC20 tokens in the BTC network today, with each token’s supply ranging from hundreds to millions of tokens. The total market capitalisation of such tokens now stands at $906 million, with a trading volume of almost $11 million in the last 24 hours. Not surprisingly, in such an environment, Bitcoin’s blockchain is overloaded.


Why are people messing with NFT in the Bitcoin network in the first place? First of all, it's a new trend, which in the BTC world is quite rare. Still, the main purpose of this blockchain is to transfer value, and so interacting with unique picture tokens in the BTC network is new to users.

However, the main reason to connect with the derivatives platform Ordinals is price speculation, i.e. the desire to buy low and sell high. As you can understand from the list below, BRC20 tokens are growing in value quite nicely right now, which is driving people to actively conduct transactions, thereby overloading the blockchain.


Why Binance is not withdrawing bitcoins

Overloading of the Bitcoin network has led to a suspension of BTC withdrawals from cryptocurrency exchange Binance. This has happened twice in the last 24 hours, with the platform’s staff actively commenting on what is happening. Here is the rejoinder with which the exchange announced the suspension of withdrawals this morning.

We are temporarily suspending BTC withdrawals due to a large number of unconfirmed transactions. Our team is working on fixing it right now and will re-launch withdrawals as soon as possible. Rest assured the funds are safe.

Two hours later, platform officials reported the decision to replace the unconfirmed transactions with similar but higher fees. This is how miners chose to confirm them.

After another forty minutes, the withdrawals were working. However, at the same time exchange staff reported an increase in commissions. Here is the relevant rejoinder.

To prevent such situations in the future we have changed our fees. We will continue to monitor what is happening on the network and we will change the level of commissions if necessary.

Our team is also working on implementing BTC withdrawals on the Lightning network. This will also help in situations like this.

We have checked actual data: as noted on Binance, it may take from 0.0000039 to 0.001 bitcoin to withdraw BTC, that is up to almost $28. Moreover, it will take about an hour to process the withdrawal.

It is possible to understand such a decision of the crypto-exchange. After all, the platform most often uses fixed fees for withdrawals. Which means if the network’s fees get too high, Binance will either have to report its own funds or send transactions without priority, which could end up with a lengthy lack of confirmation.

How has the community reacted to Bitcoin’s problems?

Rising fees on the Bitcoin network have led to a scandal. So-called Bitcoin-maximalists, who criticise NFT in the cryptocurrency network because the latter allegedly does not fit into BTC creator Satoshi Nakamoto’s vision, have started talking about an alleged DoS attack on the blockchain. Here is the relevant rejoinder from a user nicknamed iris.to.

Bitcoin has fallen victim to a DoS attack. High transaction fees are chosen by the attacker as a pain point. This is probably to make Bitcoin unusable for smaller players.


Note that many BTC-maximalists in recent months have not only criticised Ordinals-based NFT, but have also suggested blocking such transactions at the miner level. And while this is trivial censorship, fans of the first cryptocurrency are somehow not embarrassed by this approach.


The same user admitted a few tweets later that he did not directly consider what was happening to be an “attack”. He called his previous statement a hyperbole, although it was essentially just a lie.

Here’s a comment about what’s going on by a user nicknamed 0xfoobar with almost 130,000 users.

The Bitcoin meme finally got some method of application, and the maximalists have taken to pitching this as a DoS attack on the network. That is, they haven’t even allowed for the simplest possible scenario along the lines of “Bitcoin has become popular and people want to pay to use it”.

Who benefits from the rise in Bitcoin fees

The abundance of transactions with high fees is a paradise for miners, who get paid to confirm transfers. According to The Block platform, given what’s happening in May 2023, miners are getting about 16 percent of total revenue from commissions. This is a historically high result.

The high commission situation has resulted in commissions starting to exceed the base reward of 6.25 BTC per block. Specifically, a block was mined tonight for the first time since 2017, with commissions reaching 6.76 bitcoins. In other words, the lucky miner’s income almost doubled here.

At the same time, the high commissions led to a delay in bitcoin withdrawals for 2Miners pool miners. This is about the system of automatic conversion of mined ETCs, ERGOs and RVNs into bitcoins, which we described here. Accordingly, users will have to wait for the normalization of commissions situation.

Conclusions

This situation clearly shows the disadvantages of low bandwidth blockchains. Although technically they continue to work without any problems, most ordinary users cannot afford to send tokens for $15 and exchanges on decentralised exchanges for $50.

Consequently, they have to avoid interacting with the network under such conditions, in parallel losing unrealised income or something else. The only hope here is for developers to make the effort to scale the blockchain. In the case of Ethereum, sharding will be such a solution, but it will obviously take at least a year to implement. Well, Bitcoin will continue to run on Proof-of-Work and encounter similar glitches. There is clearly nothing that can be done about that.

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