Binance, Bitfinex, and Poloniex have come to pay between 3 and 10 times more than necessary. Fee rates rise above averages with exchange overpayments.
A sudden drop in miners’ hash rate may be contributing to the increase in fees for processing Bitcoin transactions. Other factors include transaction congestion and overpayment from users of the Bitcoin network, according to exchanges.
Cryptocurrency exchanges charge very high figures for withdrawing Bitcoin (BTC) from the platform. Although they do it to pay miners, those amounts are not necessary to confirm the sending of BTC.
Since miners include the transactions in each block, they receive the fees for processing the sending of Bitcoin. The higher the payment, the greater the incentive for miners to include the transactions.
The minimum unit to measure fees in Bitcoin is the satoshi (or sat), which is equivalent to 0.00000001 BTC. For this value, it is necessary to cross the total weight of the information and a rate in sats per vByte of data.
Paying 10 Times More Than Necessary for Sending Bitcoin
Binance and other exchanges pay fees above what the network needs to process their customers’ withdrawals. For example, Binance paid a rate of 100 sats/vByte, when the block average was 20 sats/vByte.
For its part, Bitfinex paid a rate of 143 sats/vByte when the general average was 54 sats/vByte per block.
The exchanges paid three times the average and almost ten times the minimum rate needed to enter the block.
Poloniex paid a rate of almost 350 sats/vByte, meaning that the overpayment was six times the average and more than 20 times the minimum rate.
A single transaction per block should not seriously affect the fee average. However, exchanges move high volumes of money daily through thousands of transactions.
How the Excessive Payment of Fees for Sending Bitcoin Affects Users
Many users fall victim to excessive fees for sending a few US dollars in BTC from a wallet.
Wallets usually set the average rate to enter the first block to mine as a priority rate. If users cannot define the fees to pay, they could be spending much more than necessary.
Every transaction by exchanges, some individuals and other services using Bitcoin causes that average to go up. As minutes pass without any blocks mined, the number of high-fee transactions grows.
The average of block 688,887 was 42 sats/vByte but confirmed transactions of 3 sats/vByte entered. By sending at the average rate, users pay 14 times more than necessary.
According to mempool.space, an average transaction could include around 140 vBytes of information for native SegWit addresses. At a rate of 42 sats/vByte, that would be a total of 5,880 satoshis or a total fee of around USD 1.86. With the rate of 3 sats/vByte (a total of 420 satoshis), the payment would be just USD 0.13.
In times of high congestion, that difference increases and could reach tens of US dollars. According to data from Blockchair, in April, there were fees above USD 60.
This situation becomes worse when customers withdraw their funds since exchanges often charge fees well above necessary. Besides, they pay miners less than they charge customers, so overpaying does not affect them. While customers lose due to their withdrawal, Bitcoin users do due to the increase in fees on the network.
By Alexander Salazar
