The Bitcoin network has endured rising congestion due to several reasons, including a new NFT-like minting protocol. Binance struggled in recent days to process BTC transactions so much that it had to pause these transfers – a surprising move by the world’s largest crypto exchange that described the event as a “learning experience.”
In a blog post, Grayscale noted that “as of May 8, 2023, the Bitcoin network is experiencing a record high of 465,000+ transactions awaiting confirmation in Bitcoin’s mempool.” Grayscale added that transaction fees jumped to offset demand, noting that this is the first time in Bitcoin’s history that a spike like this happened in a bear market.
Last month, Bitcoin neared $31,000 – nearing a one-year high. Today, Bitcoin is sagging, trading at around $27,000 (still considerably higher for the year).
Bitfinex shared a comment on the Bitcoin traffic jam. Paolo Ardoino, Bitfinex CTO and unofficial spokesperson, stated:
“Lightning is well-placed to ease congestion issues on the Bitcoin network. At Bitfinex, we saw 11,000 transactions in the past 30 days, and I expect this will only grow. We need more exchanges and more users of exchanges to push for Lightning in order to benefit from faster speeds and at much lower costs. Blockstream’s Liquid network is also a good secondary layer that can help in situations where [the] mainchain is congested.”
Kraken, the second largest crypto exchange, makes a similar statement noting that it has supported Lightening for over a year.
Concerned about network congestion?
Kraken has supported the #Bitcoin Lightning Network since April 2022⚡
Learn more 👉 https://t.co/lQGx8602JP pic.twitter.com/MaqKsB98l7
— Kraken Exchange (@krakenfx) May 8, 2023
The recent Bitcoin congestion probably will have little impact as platforms and people adapt and move forward. Grayscale sees a silver lining in the near term hurdles:
“… this situation highlights the expansion of the broader Bitcoin community to include new participants. The fee spike, primarily driven by a blend of developer innovation and increased user engagement, suggests that the Bitcoin community will likely continue to attract new users and developers. This growth could pave the way for a fresh influx of creative developers who can further enhance the ecosystem.”
Grayscale believes that Bitcoin’s new ability to create non-fungible tokens may drive BTC to more closely correlate with Ethereum.
More important is the recent global economic and geopolitical events that have boosted interest in Bitcoin. Stubborn inflation has compelled investors to look for alternatives, with Bitcoin being one of the beneficiaries. A more interesting question is what happens to BTC once inflation is under control, whenever that is.