The Bitcoin network is weighed down by increasing number of transactions over the blockchain. Thanks to the smaller block size of 1 MB, which has not been upgraded since the days of Bitcoin’s creation. The increased load on the network has led to delays in confirmation of transactions. Miners have started to give priority to transactions with higher miner fee, leading to an increase in the average miner fee per transaction.
The increasing transaction fees make micro-transactions over the Bitcoin network virtually impossible. At the same time, those who are prone to making a large number of bitcoin transactions will end up paying a lot in transaction fees. In order to overcome these issues, 21 Inc. has implemented micropayment channels, that are designed to handle a large number of transactions between two parties without having all the transactions confirmed over the blockchain as long as the channel is kept open between the two wallet addresses.
The average miner free for faster confirmation on the blockchain currently stands at about 40 satoshis per byte. Each bitcoin transaction is about 250-256 bytes, which will put the average bitcoin transaction fee at around 10,000 satoshis or more, equivalent to $0.04. The graph on 21 Inc.’s bitcoin fees predictor shows the average time taken to confirm the digital transactions on the blockchain based on the assigned miner fee.
Bitcoin fee predictor uses blockchain data from the past three hours while factoring in the unconfirmed transactions in the mempool to present a chart of average transaction time, miner fee, and block delay.
The micropayments channel allows bitcoin users to overcome this hassle by recording all the transactions happening over the channel just twice over the blockchain. Similar to opening a tab on a credit card in your favorite bar, the micropayment channel will record a transaction once the channel is created, by locking a certain amount of bitcoin for future transaction over the channel using OP_CHECKLOCKTIMEVERIFY and each payment can be signed by the sender, with an option for the receiver to withdraw the signed amount whenever he/she wishes or wait till the micropayment channel is closed to receive the transaction amount. The largest transaction chunk on the channel will be broadcasted to be recorded on the blockchain.
In order to execute all the transactions happening over the Micropayment Channel, multiple local versions of the transactions are created, which will be broadcasted to the blockchain one after all the transactions are received. The recipient should broadcast the payments to the blockchain before the expiry of time lock period. Otherwise, the locked funds will become available for spending.
Micropayment channels will help reduce the cost and time and cost associated with multiple transactions over the blockchain. It is similar to the Lightning Network, proposed to be implemented into the Bitcoin core in the coming days.
Ref: BitcoinFees21 Image: NewsBTC