Bitcoin Transaction Batching Live at Coinbase

Bitcoin Transaction Batching Live at Coinbase

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Last week, Coinbase rolled out Bitcoin Transaction Batching which can cut users’ network fees in half.  

This new concept changes the intrinsic structure of how transactions are conducted at Coinbase. Previously, whenever a bitcoin was sent on Coinbase, a single on-chain transaction was created. In the new format, numerous bitcoin transactions will be “bundled” into a single transaction instead. In doing so, Coinbase will then be “reducing their load” on the bitcoin network by as much as 50%. The upshot of this is that it will translate into the same amount being reduced in fees. Hence, users network fees will now also be decreased by 50%.

Overall, it is good news for traders on their platform as these lower network fees will be available immediately without them having to move a finger. Although there will be a small delay in a transaction being broadcast to the network, it is said this will not have an impact on customers and they will be confirmed at the normal rate. Ultimately, it means that you will benefit from lower fees while losing nothing in terms of speed or quality of services. As such, it is a win, win for traders.

The concept is effective in utilising the nature of the bitcoin network to their advantage. Already on the bitcoin network, transactions are packaged into blocks and added to the end of a blockchain. These blocks have a fixed capacity and are created on average every ten minutes. Due to this high demand for limited block space, the fees can become high.

With the new batching process from Coinbase, less space in each block is occupied. Coinbase explains simply that, “the whole is less than the sum of the parts when it comes to Bitcoin transactions.” Based on this, it means that making one batch transaction causes less demand and so in turn, lower fees. As you can see, it is a matter of using a previous flaw in the system to their own advantage and their traders will benefit as a result.

It ism in fact, primarily this reason as opposed to the decrease in fees that the decision has been made. Namely, they are attempting to help with bitcoin’s scalability, an issue that has plagued Bitcoin for some time. This has been prohibited in the past due to these fees. Most prominently, when the network is highly active as it results in users needing to outbid each other for transactions to be processed.

In some cases, this could mean fees that are over $30 which is not a good price in anyone’s book and of course, would encourage traders to use other means to make transactions. Particularly this was the case for low-value transactions which can’t justify the spending of that much in order to complete the transaction. Fortunately, this was rare, but fees per transaction can still cost around $0.30 for a transaction.

It is these low figures that Coinbase are trying to tackle. As they put it, “supporting transaction batching is one way that Coinbase can help make Bitcoin more usable by lowering network fees overall and freeing up space on the blockchain. This enables the network to increase transaction throughput, and helps to increase scalability.”

These steps have already been rolled out on both Coinbase and Coinbase Pro and so traders can already benefit and help contribute to Coinbase’s goal. In regards to Coinbase Pro, 100% of fees are already covered so you won’t actually see any changes.

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