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Having trouble sending a Bitcoin transaction? That’s because blockchain is absolutely blowing up right now, albeit for different reasons than some might expect.
According to mempool.space, a medium priority Bitcoin transaction currently costs $34.08 to be processed instantly. The rest will have to wait and see the tsunami of over 333,400 unconfirmed transactions.
As with most Bitcoin fee spikes, Crypto Twitter has been bemoaning Bitcoin’s limited transaction throughput and pushing for efficient layer 2 and sidechain adoption. Others hailed the revenue windfall for Bitcoin miners, who more than doubled their Bitcoin profits per block.
But the cause is not Ordinals or Runes. The Bitcoin tokenization protocol is known for having extremely high fees in the past.
According to CryptoQuant, the culprit behind the Bitcoin congestion is OKX, the Seychelles-based cryptocurrency exchange currently ranked third in the world by trading volume.
“Much of the activity on the OKX exchange today is mostly related to internal trading to consolidate output,” CryptoQuant research director Julio Moreno wrote on Twitter. “This has caused fees to skyrocket.”
Much of the activity on the OKX exchange today involves internal trading to consolidate output.
Exchanges do this from time to time for wallet management purposes.
Individual Bitcoin transfers are stored in the user’s wallet as unspent transaction outputs (UTXOs). If that user wants to send Bitcoin back to another wallet, they must pay a transaction fee for every individual UTXO in the wallet, and these fees can add up if they are making large transfers.
This issue is particularly relevant to exchanges where small transactions come in and large transactions go out. Exchanges therefore “consolidate” UTXOs by spending them all at once when network fees are relatively low, merging all inputs into a much larger output from the same wallet.
This means that one large exchange that engages in this behavior has the power to raise fees across the entire network, making trading more burdensome for everyone else.
Some cryptocurrency developers have accused OKX of choosing to brute force this way, losing thousands of dollars in fees in the process.
“It’s actually not that difficult for an engineer to spend hours writing notifications for transaction fee changes greater than X standard deviations,” said Jameson Lopp, co-founder of Casa.
Edited by Ryan Ozawa.
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