Surprise: low tx fees!

[NeuroticFish]

Remember those who said that Bitcoin price cannot get big unless the fees are unbearable?
Remember the "Bitcoin has failed" narrative when the fees were big?

Well, today the mempool has cleared again.



Now I guess it would be the time for a proper discussion of what causes the mempool get so full at times.
And I blame nothing else than the arbitrage bots. I think that the mempool gets full when the price fluctuations are big.
Any idea on what could be done to prevent arbitrage bots have such a big effect?

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[ranochigo]

Make them shift to lightning I guess? What else can you realistically do? Mempool tends to get less full on weekends though and there's always this company that pushes a bunch of non-segwit transactions periodically and it can push the fees up at times during the day and it's effects is often compounded with the already full mempool.

I had a transaction back and wanted to take opportunity of the 18.5k price briefly but the TX pool was so saturated and I couldn't confirm my transaction in time even with a huge RBF. Sometimes, the mempool isn't as congested as it seems and it can just be some periods of block drought. It was definitely quite frustrating though.

[NeuroticFish]

Make them shift to lightning I guess? What else can you realistically do?

This would be awesome, but since LN is considered "beta" or "experimental" I don't expect the exchanges hurry into this.
Of course, another idea would be to somehow reduce/throttle the trading bots, but that could mean less earning/fees for them, so again "no hurry".
That's why I am asking, maybe more brains can come with more solutions / ideas.

Mempool tends to get less full on weekends though

Indeed, but I expect lower fees Saturday and Sunday, not Friday morning (working day).

and there's always this company that pushes a bunch of non-segwit transactions periodically

I've missed this part. Which company?

[ranochigo]

This would be awesome, but since LN is considered "beta" or "experimental" I don't expect the exchanges hurry into this.
Of course, another idea would be to somehow reduce/throttle the trading bots, but that could mean less earning/fees for them, so again "no hurry".
That's why I am asking, maybe more brains can come with more solutions / ideas.

That's true. I don't think throttling the bots would be effective though, exchanges would not be happy about restricting their trading frequency.

I've missed this part. Which company?

Bitmex, someone did a pretty in-depth analysis on this topic as well [1] and his writeups were pretty interesting to me. It's just a periodic surge though but I think they could've handled the TXes better.


[1] https://b10c.me/mempool-observations/2-bitmex-broadcast-13-utc/

[stompix]

Now I guess it would be the time for a proper discussion of what causes the mempool get so full at times.
And I blame nothing else than the arbitrage bots. I think that the mempool gets full when the price fluctuations are big.

I've got annoyed, tired, and then just bored to explain to people (LE: don't take this personally, probably we two never had this discussion) that the last rise in fees was not caused by the jump in price but by the drop in hashrate. You can take a look at the mempool and take a look what happened exactly on November the 3rd when after a drop of - 16.05 %  we had a difficulty adjustment, meaning not only blocks going to normal ~10mins but actually faster as the next period we experienced a growth of + 4.82 %, that means faster blocks.

So if we compare the two periods the network capacity went up by more than 20%
The same is happening now, we're mining blocks at 110% pace, meaning that for every 10 blocks we should normally see there is one extra, another 40k transaction capacity on average per day.

That's all.

Any idea on what could be done to prevent arbitrage bots have such a big effect?

You can't stop someone from sending 1, 100, or a million transactions, if they have the money to burn, that's their choice and there is nothing you can do about it. Other than trying to get miners to censor transactions in and out of exchanges but do you really want to go down that path?

[pooya87]

Remember those who said that Bitcoin price cannot get big unless the fees are unbearable?

if you replace "unless" with "if" the statement makes good sense.
the main reason why bitcoin still keeps on growing is because even though fees go up from time to time, it doesn't stay up. but if it did, then that would first slow down the growth and eventually stop it.

And I blame nothing else than the arbitrage bots. I think that the mempool gets full when the price fluctuations are big.

it is not those bots, i believe they only contribute to a small portion of the spike. it is all the traders that start moving their bitcoins around. for example when there is a price rise if i speculate an imminent correction i would transfer my bitcoins to the exchange to sell then wait for the correction to buy back and then withdraw. that is 2 on-chain transactions there. there is also a lot of altcoin traders who start dumping their altcoins to move the bitcoin to their bitcoin exchange to trade there which is another bunch of on-chain transactions.
during long rallies, there is also a big increase in the number of payments using bitcoin (to merchants) that increases the on-chain traffic.

Any idea on what could be done to prevent arbitrage bots have such a big effect?

two words: Lightning Network!

[verita1]

Mempool cleanup is a given, that's good news for Bitcoin users. It also helped hash power with the reactivation of miners based in China after the rains stopped. Whenever an anomaly like the one we saw as the increase in Bitcoin fees occurs, there is a reason. Now with the mempool cleaning the hash increased by 42% in just two days from November 9 to 10, as the article reports.

https://www.google.com/amp/s/cointelegraph.com/news/bitcoin-fees-plummet-as-mempool-clears-to-zero/amp


.

[hatshepsut93]

Now I guess it would be the time for a proper discussion of what causes the mempool get so full at times.
And I blame nothing else than the arbitrage bots. I think that the mempool gets full when the price fluctuations are big.
Any idea on what could be done to prevent arbitrage bots have such a big effect?

Bots or humans, you can't stop anyone from making Bitcoin transactions and choosing whatever fee they want, that would be against the core principle of censorship resistance. Fluctuations themselves don't cause high fees, and the price action is not necessarily causing more transactions, because the coins could just never leave exchanges. Or if institutional investors are buying, then their withdraw larger amounts but maker fewer transactions.

[taufik0911]

Now I guess it would be the time for a proper discussion of what causes the mempool get so full at times.
And I blame nothing else than the arbitrage bots. I think that the mempool gets full when the price fluctuations are big.
Any idea on what could be done to prevent arbitrage bots have such a big effect?

Bots or humans, you can't stop anyone from making Bitcoin transactions and choosing whatever fee they want, that would be against the core principle of censorship resistance. Fluctuations themselves don't cause high fees, and the price action is not necessarily causing more transactions, because the coins could just never leave exchanges. Or if institutional investors are buying, then their withdraw larger amounts but maker fewer transactions.

I think that currently there are only a few transactions on blockchains and bitcoin holders use wallet exchangers for holding instead of personal wallets this makes less transactions on blockchains considering this is the perfect moment for scalping the best choice is to store bitcoin in a trusted wallet exchanger

[ranochigo]

I think that currently there are only a few transactions on blockchains and bitcoin holders use wallet exchangers for holding instead of personal wallets this makes less transactions on blockchains considering this is the perfect moment for scalping the best choice is to store bitcoin in a trusted wallet exchanger

No... The point here is about arbitrage bots which specifically requires the funds to be transferred within the exchanges to take advantage of the differences in prices between exchanges. Leaving it on an exchange isn't safe and I don't think it's the best choice.

[NeuroticFish]

the last rise in fees was not caused by the jump in price but by the drop in hashrate.

Indeed, that was one component I've forgot. And yes, the fact the hashrate is "back to normal" means that the blocks come a bit faster hence the mempool is emptied faster.
Still, you can't deny that every time the price has a big fluctuation the number of new transactions come like there's no tomorrow.
The optimistic ones try to take advantage themselves and send coins to sell. The foolish one (sorry, reality) even keep money on exchanges for this (that's an unsafe approach).
Maybe I focus too much on bots and the number of humans sending transactions themselves is much higher than I'd think.
I also didn't know about BitMEX, thank you @ranochigo.

I hoped that there can be other solutions too, not only LN (which would be great.. and would be even better if it would be out of beta...).
From the link about BitMEX I've read that the not so far in future Schnoor + Taproot update would help on that. It is another solution, let's see how it'll go.

At least I'm a bit more optimistic now.

[Nalbo]

The number of transactions are not increasing at the rate we predicted it would. It's seem moving to segwit could just solve the large transaction fees and waiting period problem on bitcoin for foreseeable future. Unlike some other coins, bitcoin is being transferred less thanks to it's higher fees and people's reluctancy to use it as a merchant coin.

[ChrisPop]

It is common knowledge that the block time is ~10 minutes for Bitcoin and around 2000 transactions "fit" into a block. So doing the math it results an approximate number of 288,000 transactions processed each day. I have just googled and VISA processes an average of 100 million TXs per day which is significantly more than the Bitcoin network. As mass adoption advances I'm sure there will be solutions to scale the no. of TX processed.

Obviously, we can't stop people or bots to perform transactions on the network when there is a clog, so there is nothing we can do.

Haters will name Bitcoin a failure every time the tx fees are high, which happens quite rarely from my experience, but the TRUTH will be seen in the price. Let's not forget that Bitcoin has two important parts: first of all it is a medium of exchange and secondly it is a store-of-value. Gold is much more expensive to trade with than BTC.

[stompix]

Still, you can't deny that every time the price has a big fluctuation the number of new transactions come like there's no tomorrow.
The optimistic ones try to take advantage themselves and send coins to sell. The foolish one (sorry, reality) even keep money on exchanges for this (that's an unsafe approach).

Maybe I focus too much on bots and the number of humans sending transactions themselves is much higher than I'd think.

Yeah, the arbitrage bots have little impact, you can see it right now
At -16% capacity we were having to pay outrageous fees at +10% even with a bull run going on we're almost ok, so their impact is not over those percentages.
And it will never be!

Arbitrage really works if you have enough funds on multiple exchanges so you don't rush your money around, you sell and buy to avoid somebody else taking the prize, and for this, you need real money, you can't make arbitrage with 100$ and earn a living which brings us to the limited impact of those bots and their transaction
- transfers must be done directly from the exchange to exchange for faster settlements of balances so most likely those are batching trasnctions
- there is no need to immediately move all your balance, it might be possible that after you bought with 50% of your coins the price goes in different way and you have to sell on this one and dump on the other, so no need to immediately balance the accounts
- half of the balancing will have to be done in the other pair, so this brings the sums and the number of tx to half also.

Now, considering all this, adding the fact that you don't move 0.01 back and forth each day to earn a few $, and adding the fact that exchanges themselves are of doing this internally, diminishing the spread, you simply can't have unlimited bot traffic. One a million arbitrage bots try to do this the price will be flat on all exchanges and they will simply kill themselves.

I remember a debate with a friend who is a bike/common transport nutcase, telling me that no matter how much you enlarge the roads there will still be gridlocks, because more people will use more cars. At which point I asked him, so if I make all roads with 10 lines you're telling me that the 2 million people in Prague metro area will start driving around at the same time in 10 million cars?