San Francisco based crypto exchange Coinbase recently revealed how batching payments has benefited its customers, and also helped improve its internal operations.
In March 2020, Coinbase announced that it had introduced Bitcoin (BTC) transaction batching.
The exchange claims:
“Since launching, we have batched 100% of Coinbase Consumer and Coinbase Pro customer send requests for Bitcoin. Over this time, we’ve realized 75.2% savings in transaction fees and have passed all of those savings on to our customers. We’ve also reduced our daily transaction count by 95%.”
Transaction batching involves packaging up several or multiple customer send requests into just one transaction, instead of conducting a separate transaction for each request. Coinbase reveals that it has been able to amortize the overhead cost of transactions across multiple send requests, which lowers the “effective transaction fee per request.” This approach reduces the load on the overall Bitcoin (BTC) blockchain network, because every new block has limited space available and batching lets the exchange handle more payments in a relatively smaller space.
“Batching [has led to] a tremendous decrease in the overall transaction count that we generate per day. Instead of generating n transactions for n send requests, we now effectively generate a constant number c of transactions per day for n send requests, where c is based on how often we decide to batch up payments (today this happens at least once per minute).”
(Note: For more details on the anatomy of a Bitcoin transaction and how Coinbase performs batching, check here.)
Coinbase’s management claims that this approach is “a win” for the company, internally, because it means the exchange’s services have to perform significantly less work to “achieve the same end result.”
Coinbase also mentioned that the change has had “a positive impact” on the overall Bitcoin (BTC) network.
The company explained:
“By issuing the same number of send requests in a smaller footprint (fewer transactions and less block space needed), we are able to be more efficient and our overall impact on the network is reduced. Conservative estimates suggest that this has contributed to a 10–15% reduction in the number of confirmed transactions per day on the entire network.”
According to Coinbase, this transaction count reduction may be beneficial for the BTC network because it could help lower fees for Bitcoin users.