This post will give you a glimpse to the technical side of bitcoin, and will allow you to understand why fees in bitcoin are currently so high.
Miners compete with each other to find a block of transactions and add it to the block-chain, by having a proof of work[ a proof that a certain miner had put a computational power-an effort-to solve a mathematical problem].
Let us get some technical information :
- Each transaction weights about 0.5 Kilo Bytes.
- Each block weights about 1 Mega Byte
- Every ten minutes, approximately, a new block is added to the block-chain
If we calculate it, each block contains about 2000 transactions, meaning the bitcoin network can handle 2000 transactions over the course of 10 minutes.
For comparison, VISA has over 2000 TPS(transactions per second). As you can see, the number of transactions the bitcoin network can handle is very low compared to VISA.
[Often times, this problem is referred as the scalability problem]
So, why are the fees high?
After we have the background, it's easy to understand.
Miners want to earn as much as money as they can. Since they get the fees of the transactions, they add to their blocks the transactions which have the highest fees. That is why, people actually compete to get their transactions into a block by setting a high fee.
Are there suggested solutions for that?
One possible solution to the scalability problem is increasing the block weight to 2 Mega Byte. However, the most promising solution right now is called "the lightning network"; an off-chain solution on which I will further elaborate in a separate post.