Bitcoin’s one-megabyte block size limit, and the scaling issues that come with it, have long caused a deep divide within the community. Some in the community have supported an unchanged block size while waiting for a release of Segregated Witness, while others have attempted to fork Bitcoin to increase the block size. In the meantime, transactions have become increasingly slow and expensive as the network becomes increasingly overloaded. Unfortunately, there is a human cost to these delays.
Bitcoin’s confirmation times keep climbing
As its user base has grown, Bitcoin’s transaction volume has exceeded current network capacity, causing a delay in transactions. The current one-megabyte limit of blocks frequently shows blocks at capacity, and the mempool of backlogged transactions continues to grow, peaking at over 48 million unconfirmed transactions during a spam attack in November. The median confirmation time continues to rise and currently rests at about 15 minutes per transaction. However, in March when confirmation times were shorter, Reddit user /u/seweso compiled the average rather than mean transaction time and came up with a much higher figure of 43 minutes.
Bill McGonigle from New Hampshire, the owner of Bitcoin-accepting business Kidsweet, LLC, has run into delays in online shopping:
“Nothing so dramatic, but using it online I've had to keep an eye on transactions for more than an hour to take the next step in checkout or whatever. Check it, nope, get distracted, come back later, check it, nope, go do something else, check it - ah, finally I can finish checkout (hope the card hasn't expired). Not a huge pain, but if I want to buy with BTC I have to plan to be at the same computer for the next two hours. Compared with PayPal, where I can buy something five minutes before I'm out the door.”
Though the annoyance of having to wait around before a transaction confirms is real, McGonigle sees a greater threat in crippling Bitcoin’s basic utility:
“If somebody is trying to make Bitcoin practically unusable, they're doing a great job.”
The delay in transactions is especially apparent to users of other cryptocurrencies that have not faced similar scaling challenges. Roel Boer, co-founder of Nocks from the Netherlands, noticed the slow speed of Bitcoin when it was exchanged for Gulden through his service:
“We had someone that purchased 6 BTC worth of Gulden through us with Nocks. He initiated the purchase on Saturday and the Bitcoin confirms came in late Monday.”
Fees are rising and becoming less competitive against card processors
As blocks become overloaded, Bitcoin’s transaction fees must increase in order for priority transfers to go through on time. As such, fees have been rising over the past several years, cutting into one of the main competitive advantages over traditional financial transactions. According to data compiled by Bitcoinfees.21.co, the average fee for a transaction to be included within the next six blocks, possibly over an hour’s time, is about $0.14, with the average for the next 3 blocks and next block approximating $0.16.
For reference, the point of sale system Square charges 2.75% for swiped card transactions. For a $3 cup of coffee, that would amount to $0.075. A Bitcoin transaction would cost double and take possibly an hour or more to confirm, compared to a card processor’s instant transaction. For larger transactions Bitcoin still remains more efficient than traditional wealth transfer methods, but for everyday use it has begun to lose the game.
For Chloe Sowers from New Hampshire, the fees required for an efficient transaction ended up being noticeable:
“I had to pay such a high fee for my meal that Bitcoin fees are like a 1.8% sales tax.”
Bitcoin’s network issues are seriously impacting everyday usability
Beyond a simple annoyance, the significant delays in confirmation times can have serious implications for day-to-day business. Most major companies and services require at least one confirmation before processing orders in order to protect against double spends and transactions with an insufficient fee to ever be confirmed. This can result in a transaction taking hours, even days, to complete, making many transactions untenable.
Malcolm MacLeod from South Africa had a slow Bitcoin transaction cost him savings:
“I missed out on a special I wanted to buy on Takealot at some point early last year because a Bitcoin transaction took a day to confirm, by the time the Bitcoin cleared the item was no longer on sale.”
These delays more commonly affect in-person transactions. Many Bitcoin enthusiasts employ gift card services such as Gyft to be able to use their coins at establishments that may not directly accept them. Since Gyft requires at least one confirmation before processing a gift card, this can mean a very awkward shopping experience. Forrest from New Hampshire experienced this firsthand:
“About 6 weeks ago, I tried to use Gyft at two stores in a single 3 hour period and waited 45 additional minutes to check out at the 2nd store before giving up. This happened because Gyft needed one confirmation on the 2nd transaction (it was using unconfirmed change from the first transaction). I thought that surely we'd get 1 confirmation in the next 2-3 hours after the first transaction - after all, we used the recommended transaction fee in Mycelium. I cannot imagine how frustrated someone would be if they were just casually trying out Bitcoin/Gyft and had no idea about how confirmations worked, or how the recommended fee can now be jacked way up after your transaction is already submitted. It was a very sad and infuriating experience to see first-hand that Blockstream had successfully destroyed, for the short-term anyway, what used to be a smooth, fast, and easy user experience.”
Josh Noone from Massachusetts had a similar embarrassing experience at a restaurant:
“Yeah, I had an issue. The lady at Chipotle felt bad for me and gave me the burrito. Had no cash. Went back to pay the next day once the damn Gyft card went through.”
Bad user experiences may drive Bitcoin users to other cryptocurrencies
The final result from lower Bitcoin performance is that some users have been driven to abandon it altogether in favor of other digital currencies. Amanda B. Johnson, a web show host and former Bitcoin enthusiast, now holds Dash exclusively and promotes the cryptocurrency via her web show Dash Detailed, after becoming disillusioned with Bitcoin over delayed online purchases:
“The first time Bitcoin's network congestion and fee chaos affected me was when I placed a Purse.io order earlier this year. I was using a popular Bitcoin mobile wallet and figured it’s recommended fee would be sufficient. Nearly 24 hours later, I was still waiting for a confirmation, meaning no Amazon order had been placed. That's not the future of money.”