What made network fees so low?

[Alpha Marine]

I know it's a noob like question, but I've been struggling with it.
For about a year or two now, Bitcoin's transaction fees have been extremely low. I remember times when we had to deal with congestion because of ordinals, BRC-20 and the rest, and now it seems like that is a thing of the past because for a very long time we haven't had that issue. I would simply like to know what happened. Were there upgrades in the new versions of Bitcoin Core to prevent things like this, or are they still in the network but can't cause congestion?

Secondly, even when there is no network congestion, in the past, network fees were not this low. Currently, the fee for a high-priority transaction is fluctuating between 1-3 sats/vB, which is about $0.30. In the past, in normal networks, the fees could go about $1+ or closer to $2, so what changed in the last two years?

And I don't believe it is the "lower network congestion or less competition for block space" answer I get whenever I try to read up about it. I'm not convinced by that answer because when I look at the daily trading volume of Bitcoin, it has even increased, and the average daily transactions have increased over the years too. This means there are evidently more transactions now than two or three years ago. This means there should be more congestion now, so why aren't there any?

[Upgrade00]

I remember times when we had to deal with congestion because of ordinals, BRC-20 and the rest, and now it seems like that is a thing of the past because for a very long time we haven't had that issue. I would simply like to know what happened. Were there upgrades in the new versions of Bitcoin Core to prevent things like this, or are they still in the network but can't cause congestion?

The congestion caused by ordinals and runes was a hype at the time, it was always going to fade away and free up the space on the network. On both sides of that period the network fee was within the normal range it is in now.

Secondly, even when there is no network congestion, in the past, network fees were not this low. Currently, the fee for a high-priority transaction is fluctuating between 1-3 sats/vB, which is about $0.30. In the past, in normal networks, the fees could go about $1+ or closer to $2, so what changed in the last two years?

There were periods in the past that the fee rate was fluctuating within the same range it is in now. If you monitor the thread about consolidating your addresses, you will be able to see the different fee rate ranges that we had.

[Zaguru12]

I will say it like Satoshi, sorry I can’t convince you but let me try

For about a year or two now, Bitcoin's transaction fees have been extremely low. I remember times when we had to deal with congestion because of ordinals, BRC-20 and the rest, and now it seems like that is a thing of the past because for a very long time we haven't had that issue. I would simply like to know what happened. Were there upgrades in the new versions of Bitcoin Core to prevent things like this, or are they still in the network but can't cause congestion?

Bitcoin transactions have been low because there less network congestion and this is the outright truth, when there was congestion caused by ordinals and inscriptions, yes they have not total die down but the hype around them has definitely died down because like some scam proposals like ICOs and NFTs people do not gamble on them anymore.

There was never any consensus rule changes because of them, neither where there any block size increments or soft forks proposals like BIP-110 which were to temporarily to segregated this arbitrary data on bitcoin transactions were approved the consensus rule remains the same, BRC20 are not hidden somewhere.

Secondly, even when there is no network congestion, in the past, network fees were not this low. Currently, the fee for a high-priority transaction is fluctuating between 1-3 sats/vB, which is about $0.30. In the past, in normal networks, the fees could go about $1+ or closer to $2, so what changed in the last two years?

Let’s say there are many bitcoin users who uses addresses like Segwit and taproot addresses more now than in the early days of this soft fork were bitcoin legacy addresses were a thing, we know the difference that transactions between Segwit addresses and legacy addresses brings in terms of block size congestion. So this might have been the clear difference between now and then

Also there are many users of second layer networks now which takes some transactions temporarily off the base chain transactions to reduce network congestion

And I don't believe it is the "lower network congestion or less competition for block space" answer I get whenever I try to read up about it. I'm not convinced by that answer because when I look at the daily trading volume of Bitcoin, it has even increased, and the average daily transactions have increased over the years too. This means there are evidently more transactions now than two or three years ago. This means there should be more congestion now, so why aren't there any?

You don’t need to look only at trading volume because there are even offline or internal transactions on exchanges which contributes to the bitcoin trading volume and they do not contribute to onchain transactions example is the usual future or spot trading on exchanges

[Cookdata]

I know it's a noob like question, but I've been struggling with it.
For about a year or two now, Bitcoin's transaction fees have been extremely low. I remember times when we had to deal with congestion because of ordinals, BRC-20 and the rest, and now it seems like that is a thing of the past because for a very long time we haven't had that issue. I would simply like to know what happened. Were there upgrades in the new versions of Bitcoin Core to prevent things like this, or are they still in the network but can't cause congestion?

There was a Bitcoin Core upgrade, but it wasn't what reduced the fee drastically. Ordinals inscriptions came with hype, some came as airdrops, and because everyone wanted a piece of the cake, the trend caused mempool disturbance and spam, but as the hype dies down, it wasn't too profitable, so the activity stopped, and the mempools became free. You can see from the chart below how the fees reduced over the years.



https://dune.com/dataalways/ordinals

The Bitcoin Core upgrade that happened was to encourage people to use Op_return to include arbitrary data instead of exploiting taproot with ordinals. This was last year between September and October when Bitcoin Core version 30 was released with data carrier size up to 100kb instead of the old versions with 83 bytes.

Secondly, even when there is no network congestion, in the past, network fees were not this low. Currently, the fee for a high-priority transaction is fluctuating between 1-3 sats/vB, which is about $0.30. In the past, in normal networks, the fees could go about $1+ or closer to $2, so what changed in the last two years?

And I don't believe it is the "lower network congestion or less competition for block space" answer I get whenever I try to read up about it. I'm not convinced by that answer because when I look at the daily trading volume of Bitcoin, it has even increased, and the average daily transactions have increased over the years too. This means there are evidently more transactions now than two or three years ago. This means there should be more congestion now, so why aren't there any?

I think it's all about block demand. When everyone fights to get their transaction fast in the next block, it increases the fees naturally, but since ordinals went to an all time low, there was enough space for everyone to get their transaction confirmed. As the mempool became stable with time, people no longer overpaid fees. At some points, some nodes reduced their minimum relay fee to accept transactions that are below 1 sats/vbyte and gradually some other nodes and miners did the same, but not all miners and nodes have reduced their minimum relay fee because of spam.

[NotATether]

The default minimum fee allowed to be relayed by Bitcoin Core for transactions was slashed from 1 sat/vbyte to 0.1 sat/vbyte several months ago.

This basically collapsed fees by 10x overnight, when they were already at 1 sat/vbyte before.

[Mia Chloe]

~snip

Well in simple terms it's just the forks we implement. Basically it first started from the era when only legacy addresses that was when congestion was the biggest of problems then we got SEGWIT. But the thing is there are basically different versions. lately we got an even better upgrade which was taproot.

Basically taproot reduces fees by using the merkel tree to reveal only the executed spending path instead of the entire script which actually reduces the transaction size in bytes lowering the fees since Bitcoin fees are based on transaction weight (vbytes). So the more wallets allow taproot the more efficient transaction will be and the cheaper fees will be.

[Zaguru12]

Basically taproot reduces fees by using the merkel tree to reveal only the executed spending path instead of the entire script which actually reduces the transaction size in bytes lowering the fees since Bitcoin fees are based on transaction weight (vbytes). So the more wallets allow taproot the more efficient transaction will be and the cheaper fees will be.

Agree with you that the any of Segwit addresses either native Segwit (version 0) or Taproot (version 1) actually save fees. The merkle tree you mentioned though is actually a privacy advantage and then making multi sig transactions looking looking like a single sig transaction.

But the issue of saving fees or cheaper fees, it’s not in all transactions that Taproot is the best option, the native Segwit (bc1q) transactions are best for same input and output Transactions like 1 address to 1 address transactions or if the transaction has a smaller inputs than the outputs like spending from one input address to two output addresses (1 recipients and also a change address) or like signature payment from the campaign manager to multiple recipients addresses, the native Segwit is the best option because native Segwits has less output vbytes than taproot. A native Segwit address sending in 1 address to 1 address is around 141 vbytes but that of taproot is higher

But for a multiple input to few output transactions, taproot edges and saves fees example is the consolidation of little UTXOs to one this is because taproot addresses have smaller outputs vbyte compared to native Segwits

Then the multi sig transaction advantage while using taproot primarily due to the use of Schnorr signatures by the taproot addresses.

[Mia Chloe]

~snip

Even if lower fees generally is a good thing for the network I've always had this theory that if feeds continue to drop constantly and considerably like it already is especially after the drop in relay fee Notatether mentioned it might take us to a point where layer 2 seems less useful to the average spender.

Almost everyone using the lightning network at some point is mainly doing it to cut down fees because just a small percentage might be using it for privacy related reasons.

[Zaguru12]

Even if lower fees generally is a good thing for the network I've always had this theory that if feeds continue to drop constantly and considerably like it already is especially after the drop in relay fee Notatether mentioned it might take us to a point where layer 2 seems less useful to the average spender.

Almost everyone using the lightning network at some point is mainly doing it to cut down fees because just a small percentage might be using it for privacy related reasons.

Yes this is definitely right if the fees remain like this which is as a result of less network congestion I think Layer 2 usage for average users will definitely reduce. But I don’t think it will actually fully take away layer 2 because most of the layer 2 usage have secondary use case.

The secondary usage is fast transaction confirmation, I think if bitcoin actually gets adopted more and people actually starts to use bitcoin for payment methods like businesses accepting bitcoin payments, layer 2 will be considered for this micro payment and for fast transaction confirmation.