The Coinbase Starts BTC Transaction Batching, saving users more than 50% on network fees
March 16, 2020 3:27 pm
The Coinbase, Major cryptocurrency exchange on March 12, revealed a new feature that significantly decreases the load that Coinbase puts on the Bitcoin blockchain and may save users money more than 50% on network fees.
According to a blog post released by the exchange, The Coinbase would begin allowing Bitcoin (BTC) transaction batching for its customers promptly.
Additionally, Eli Haims, Coinbase Product Manager, described the move that “every time a Coinbase customer sent bitcoin, we broadcasted a single on-chain transaction. Starting today, we will be bundling multiple sends into a single transaction — we anticipate that this will reduce our load on the Bitcoin network by more than 50%, and the network fees our customers pay will automatically be reduced by an equivalent amount when sending. This update requires no action from customers, who will immediately see reduced network fees. This release will introduce a small delay in a transaction being broadcast to the network, but will not impact the time it takes for transactions to be confirmed at the normal rate for customers.”
The action taken by Coinbase, “needs no action from customers”, will enable single on-chain transactions of cryptocurrencies to be bundled into one. The exchange predicts this will lessen the pressure on the BTC network and the resulting fees customers pay for sending money.
Whats’ the Benefit of this?
Like other popular payment systems, all Bitcoin trades are required to pay a network fee or a processing fee. Through periods of high activity on the network, Bitcoin(BTC) users compete to have their transactions processed, paying each other via network transaction fees. This has made Bitcoin(BTC) users to days when the median network fee for a single transaction was over $30. The size of this fee rendered Bitcoin impractical for low-value transactions.
Developing an open financial system is to enhance the usability of Bitcoin’s open protocol. A serious restriction for Bitcoin usability is scalability or the rate at which the network is proficient of processing activities. Now, daily middle network fees on the Bitcoin network for a transaction is only $0.30.
Transaction batching Took Long Time
This new feature of transaction batching was under progress for a long time. CEO Brian Armstrong tweeted on June 6, 2019.
Transaction batching will now be available for both Coinbase and Coinbase Pro platforms, others were more active on the uptake. Kraken, U.S. based crypto exchange and Switzerland based ShapeShift already offer transaction batching.
How does Transaction batching work?
The Bitcoin network prepares transactions by packaging them into blocks and attaching these blocks to the end of the blockchain. Every block has a fixed size (in bytes) and is produced on average in every 10 minutes. An insufficient supply of block space, and rising requirement for transaction processing, leads to high charges.
A particular transaction that accomplishes various user sends requests holds less space in each block than each being processed independently. In other words, the total is less than the sum of the parts when it comes to Bitcoin transactions.