Bitcoin transaction fees show cryptocurrency’s limits

The bitcoin rate spike, still alive despite bitter divisions in the community that supports the cryptocurrency, has laid bare the biggest problem with bitcoin: compared with fiat currencies, it’s painfully inconvenient and expensive to use as a means of payment.

Bitcoin is set up to reward users for verifying transactions. Miners who package transactions into “blocks” receive two kinds of rewards: the additional bitcoin they produce by using their hardware to solve mathematical problems (an income stream that will eventually cease since 21m bitcoins are the maximum that can be mined) and the transaction fees paid by users to get their payments into blocks.

The bitcoin system is designed around scarcity and its traditionalists insist on keeping the block size small (rebels who did away with that tenet founded an offshoot, bitcoin cash, earlier this year).


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