Despite Slow Start, Analysts Believe 2018 Could be the Best Year for Bitcoin

Cryptocurrency markets are not off to a good start in 2018. Most markets have lost nearly half of their value during the first few weeks. This most recent dip has pushed the momentum back as well. Even so, analysts are convinced this year will be very bullish for all cryptocurrency markets in the long run. Especially Bitcoin may see some big gains.

Bitcoin Scalability Improvements?

All cryptocurrency markets have seen major declines throughout the first seven weeks of 2018. Although Bitcoin showed some good momentum this week, most gains have been lost once again. Whether or not this is a bubble effectively bursting, remains to be determined. However, there are still a few solid reasons as to why things may turn out for the better. Julian Hosp remains bullish on cryptocurrency for quite some time to come.

Especially where Bitcoin is concerned, things can still improve quite a bit. With new scaling solutions coming to the ecosystem, a lot of progress will be made. Segregated Witness is now enabled by default through the Core client. It has also become more convenient to use altogether. If this adoption rate improves, the Lightning Network has a fair chance of succeeding as well. For now, there is no official release date for the Lightning Network as of yet.

With a lack of scaling, Bitcoin made a lot of headlines due to mounting fees. At one point, a Bitcoin transaction cost over $20. It is far from ideal, yet solving the problem is not all that easy. With SegWit and LN, those fees should eventually come down over time. Only time will tell if this works as people expect it to. Moreover, the addition of smart contracts to Bitcoin through Rootstock is something to look forward to.

Other Cryptocurrencies and ICOs

Cryptocurrency is about so much more than just Bitcoin, though. More regulation of this entire industry can be a good thing in many different ways. If an industry is regulated, it is “validated” in the eyes of the general public. For now, we see dozens of countries looking into regulating Bitcoin and other currencies. Not everyone is a big fan of regulation, as it imposes severe restrictions in some cases. For now, it seems further regulation will help legitimize cryptocurrencies and digital tokens moving forward.

Most people expected institutional investors to make a big impact on cryptocurrency. Through the Bitcoin futures, that should have happened some time ago. So far, the initial interest in such futures has been rather limited. Even though the volume is picking up, it remains to be seen if institutional investors effectively show a real interest in cryptocurrency. Depending on how this trend evolves, we may see some big progress in overall prices moving forward.

Last but not least, the elephant in the room is the ICO industry. To many people, it seems initial coin offerings are the downfall of cryptocurrency. With the SEC cracking down on illicit projects, things will improve moving forward. It all comes down to more legitimate coin offerings in the future, and which companies will embrace this model. Especially with Telegram turning their ICO into an IPO of sorts, it is evident the business model itself may see some big changes.

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Love it or hate it crypto exchange Coinbase is raking it in. Known for some of the highest fees in the industry the company made over a billion dollars in revenue last year. This has caused an unusual problem in too many investors wanting a slice of the burgeoning Coinbase pie.

Silicon Valley tech news website Recode has revealed that the six year old company earned in excess of a billion dollars in revenue in 2017. This is really no surprise considering the thousands of complaints that regularly crop up across social media platforms. These usually involve the exchange’s excessive fees and commissions for transactions, or the total outages it has suffered under high demand. Coinbase is slow, expensive and has virtually non existent customer support but obviously that has not affected its capacity to make a fortune.

Beating the rest

As of September last year the company was only expected to make $600 million in revenue. However the surge in crypto prices and interest towards the end of the year has provided a boost to the firm’s figures. Its bumper revenue suggests it is the most used broker for Bitcoin and crypto exchanges. By comparison South Korean exchange Bithumb only made $280 million last year according to local press.

The company has been so successful that shareholders have been approached by venture capitalists and private brokers asking them if they would consider selling their Coinbase shares. The firm issued a warning to its own shareholders at the weekend;

“As a private company, Coinbase does not allow trading of stock on secondary markets for a variety of reasons, including the fact that there is not full and equal information available to the market. We will take appropriate action if we find people have sold Coinbase shares in violation of our agreements not to do so.”

Fees and commissions

Coinbase does not make money on the price fluctuations of Bitcoin. It charges for every transaction through its system so volume of trades makes a big difference. It charges both the buyer and the seller between 0.25% and 1% commission on the total transaction size thus working as both an exchange and a broker. In addition to this there are fees as high as 4% for fiat deposits and withdrawals.

For many they have little choice but to use Coinbase as their primary exchange due to limitations within their own country. The company offers fiat to crypto exchanges in 32 countries across the globe and has over 13 million registered users. At one stage it had the most popular app in Apple’s App Store and has more brokerage accounts than trading giant Charles Schwab. Coinbase’s killing is set to continue as crypto mania shows no signs of slowing down.

It has proven to be another difficult weekend for the Bitcoin network. With the number of unconfirmed transactions rising again, the scaling issues become more apparent. It is not the first time we see incidents like these occur either. Until Bitcoin scales, such problems will only become more common.Especially users with low-fee transactions will feel the brunt of these problematic developments. Waiting over two full days for one network confirmation is anything but fun.

Bitcoin network issues are occurring virtually every week now. Not a long period goes by without transaction delays, high fees, or some other issue. This situation has been present for some time, but seemingly one grows worse. This weekend has proven to be no exception in this regard. Some users are waiting for two full days to get just one network confirmation. It is an unacceptable situation which needs to be resolved sooner rather than later.

Another bad Weekend for Bitcoin Transactions

With over 165,000 unconfirmed transactions, things will not improve soon. It is very unfortunate. to say the least. Bitcoin is still the world’s leading cryptocurrency but it struggles to operate as such. In fact, it has become fairly clunky to use Bitcoin for transactions unless you want to pay an arm and a leg in fees. Not paying the fees results in major transaction delays. While one can use a free accelerator to speed things up, it’s far from ideal. Only 100 transactions can be sped up every hour, which is next to nothing.

In fact, some accelerators now charge high fees to speed things up. Such fees can range anywhere from $25 all the way to $70. This is simply not acceptable, especially where the world’s leading cryptocurrency is concerned. If Bitcoin had scaled properly years ago, none of this would even be an issue at this point. Unfortunately, service providers are slow to upgrade in this regard. Adoption of SegWit is still lagging behind, but things are slowly improving.

Unfortunately, there is little light at the end of this long and dark tunnel. Bitcoin is not in a good place when it comes to transactions. Although there is no shortage of transfers, there is an excess of issues. Problems like these are almost so common people hardly bat an eye these days. That doesn’t mean the issues should be ignored, mind you. Something needs to change for Bitcoin sooner rather than later. When that will be, remains anyone’s guess at this point.

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The opinions on the current state of Bitcoin are rather divided, to say the least. Some people think it’s doing well, whereas others grow increasingly worried. According to Crunchbase, Bitcoin is no longer a means of exchange. Instead, it has become slow, expensive, and anything but convenient. This is anything but a popular opinion, mind you, but there is some truth to this statement as well.

For a cryptocurrency with such a high market cap, Bitcoin lacks some basic functionality. Sending transactions is a bit of a gamble if it has to happen quickly. Including high fees is always an option but it shouldn’t even be necessary. Unfortunately, Bitcoin is no longer a means of exchange, according to Crunchbase. The value of the world’s leading cryptocurrency certainly doesn’t represent the state of the ecosystem. At the same time, these issues are nothing new under the sun either.

Crunchbase Doesn’t Like the Current State of Bitcoin

In its current form, Bitcoin is slow and expensive to use as a means of exchange. It makes for a worthwhile store of value, though. In fact, it may outperform any other financial asset in existence today in that regard. Crunchbase confirms Bitcoin shouldn’t be looked at a peer-to-peer version of electronic cash whatsoever. That situation may reverse again in the future, though. For now, it seems unlikely anything will change in the near future.

The first-mover advantage Bitcoin has is slowly eroding, to say the least. It is evident this cryptocurrency still has plenty of potential if something changes. Pushing down the fees will be very difficult until SegWit adoption increases or the Lightning Network comes around. Either of those outcomes is still months away, at best. The amount of money one pays for the speed of confirmations imply doesn’t add up. Crunchbase also touches upon the growing transaction backlog. It has been another problem for Bitcoin due to the lack of scaling.

Granted, one could easily adorable this to growing pains. It is evident Bitcoin is still maturing in front of our eyes. However, the currency has been around for many years. These issues have been known for many years as well. A lot of time was wasted due to political bickering over how scaling should work. The community eventually settled on a solution which has an adoption rate of under 15% months later. An uneasy situation, to say the very least

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Bitcoin transaction fees remain a big problem in the cryptocurrency world. It seems there is no real short-term solution to resolve this problem whatsoever. Some network upgrades are in development, but they might take months or even years to come to market. An interesting chart shows how the Bitcoin fees have doubled nearly every three months. These numbers are based on the median average fee, mind you.

Bitcoin has a serious problem which only becomes more apparent over time. Spending a lot of money as a transaction fee is never a fun experience. Unfortunately, it has also become the new normal in the world of Bitcoin over the past year and a half. Combined with network congestion, it is evident the world’s leading cryptocurrency has issues to sort out. That is always easier said than done, though. Even the introduction of SegWit has done virtually nothing to address the fees problem.

Bitcoin Fees Follow a Worrisome Trend

A recent chart shows how the Bitcoin transaction costs are evolving over time. Since April of 2016, things have certainly gotten out of hand quite a bit. Both on the high and low side of the spectrum, worrisome increases can be noted. The higher fees have doubled almost 10 times in the past 24 months. That is very worrisome and it seems there is little improvement in sight. Granted, not everyone pays high Bitcoin transaction costs, or at least, we can only hope that is the case.

Unfortunately, the “lower” median fee is also increasing. It has doubled every three months since June of 2016, which is rather worrisome. Although a lot of people don’t mind waiting hours for network confirmations, it’s still a disturbing development. Everyone assumed Bitcoin would remain a cheaper alternative to send money around the world. Right now, it fails to live up to those expectations in spectacular fashion. If the Bitcoin fees don’t come down quickly, this situation will get out of hand even further.

The chart also shows Ethereum and Bitcoin Cash fees. Despite the growth of both networks, it seems Bitcoin is off far worse. Ethereum has a fair few spikes as well, but Bitcoin fees are rising in a steady fashion. It will be interesting to see how such a chart looks in a year from now.  It is evident Bitcoin is well on track to maintain a $10 fee per transaction or possibly even more. That is not the Bitcoin most of us envisioned, though. Rest assured there will be some backlash over this development if things don’t improve quickly.

One of the bigger stories last week how Andreas Antonopoulos received a lot of Bitcoin donations. After being publicly “shamed’ by Roger Ver, the community showed their goodwill. One thing that seemed to go by unnoticed is how the high Bitcoin fees play a big role in all of this as well. More specifically, one donation worth $1.5 carried a $13.46 transaction fee. Bitcoin becomes less and less suited as a currency every single week, to say the least.

Bitcoin has a lot of network issues these days. While the transaction delays are almost solved, the fee situation is still worrisome. The recent Andreas Antonopoulos donation spree only confirms as much. One particular donation had almost 10 times its original value in transaction fees. Such a development is absolutely unacceptable, to say the very least.

Bitcoin Fees are Bonkers

It also goes to show Bitcoin is less and less suited for actual payments. With these exuberant fees, the ecosystem is evolving in the wrong direction. Spending over $13 to send someone $1.5 is getting ridiculous. It could have been a $15 donation straight to Andreas, but the fees made that impossible. This situation has been problematic for some time now. It doesn’t appear as if a solution will be introduced in the near future either.

Rest assured this particular transaction will get a lot of community attention. It is true a high fee was required to get transactions confirmed quicker. However, paying double digits in fees to spend a buck and a half is not acceptable whatsoever.  Unfortunately, this situation will remain rather problematic for some time to come. It is evident such high costs will only become more apparent as time progresses.

Whether or not situations like these will force people to altcoins, remains to be seen. Litecoin, for example, has gotten a lot of attention lately. The network also has SegWit but far lower transaction fees to boot. It is evident Bitcoin could effectively achieve the same goal. Unfortunately, most service providers have not integrated SegWit capabilities as of yet. We can only hope to see that situation change in the future, but for now, it’s not happening whatsoever.

Bitcoin network issues have been apparent for quite some time now. Especially when it comes to the mempool, things get out of hand quite regularly. It seems the backlog is filling up once again. With over 70,000 unconfirmed transactions hitting the network, things aren’t looking all that great. This is mainly due to the number of transactions per second, surpassing the 34 mark. Whether or not this is part of another spam attack, remains to be seen, though.

It is always interesting to see how things play out on the Bitcoin network in real-time. More specifically, there are mempool issues on more than one occasion. Right now, it seems the backlog is filling up pretty quickly once again. Over the past 24 hours, around 30,000 unconfirmed transactions have been added and the queue isn’t getting cleared whatsoever. In fact, it seems things are getting gradually worse right now, which is pretty troublesome.

More Mempool Concerns for Bitcoin

With so many new transactions hitting the network per second, things won’t improve soon. While it is good to see so many transactions, the network can’t handle them all right now. We also see over 1,000 BTC in fees in the mempool right now, which is quite a high number. There is no real shift in hashpower to speak of either. In most cases, such a mempool issue is caused by BCH getting more hashpower. So far, that is not the case, as the hashpower hasn’t changed much over the past few days.

There is one slightly worrisome development, though. On the three-hour chart, it shows a Bitcoin mining hashrate drop by as much as 25%. This has not translated into any major trends just yet, though. It may just be a blip on the radar, but it might indicate something is going on we don’t know about just yet. It is expected this mempool issue will sort itself out pretty soon, though. For now, there is no indication of a spam attack or any nefarious activity.

This is not the first nor the last time we will see Bitcoin network congestion. These problems have been apparent for quite some time now, and it seems this is not the last time either. Until Bitcoin can properly scale, problems like these will continue to arise on a regular basis. This is far from an ideal situation, but it is to be expected, after all. It will be interesting to see how things will unfold in this regard. It will certainly spark a lot of new debates in the coming days, that much is certain.

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Everyone knows the Bitcoin transaction fees always spark new debates. In most cases, those discussions are not going all that well. Tony Gallippi, the CEO of BitPay, isn’t a big fan of this situation either. Instead, he points out how over half of the current Bitcoin wallet is unable to spend their balance. This is mainly due to the balances being lower than the actual transaction fees. There is some backlash over this statement, as cheap transactions work just fine.

Conflicting opinions on Bitcoin fees are nothing new under the sun these days. We see debates like these pop up virtually every week. Surprisingly, BitPay CEO Tony Gallippi isn’t doing much to alleviate the concerns. While his complaint on Twitter is about fees, his company is partially responsible for the high fees as well. In his opinion, the average transaction cost is now 100,000 Satoshis. That is not entirely true, even though it may be the average charged by BitPay.

BitPay CEO Complains About Fees

It is certainly possible to have low-fee transfers confirmed as well. Any decent service that allows users to set their own costs gets transactions confirmed pretty quickly. The services which did integrate SegWit seem to have very few issues when it comes to these fees. BitPay hasn’t done so just yet at this point in time. Considering it is the largest Bitcoin payment processor, one would expect bigger and better things. So far, nothing has changed in this regard.

Gallippi further confirms over half of the existing Bitcoin wallets can’t spend the balance. More specifically, 57.26% of all addresses have less than 100,000 Satoshi in their balance. That is a surprisingly low amount of money, even though its value has gone up steadily. With the current network fee of 30 Satoshi per byte, these addresses can spend money just fine, though. The average fee is often calculated based on recent blocks. There will always be people who overpay for their transactions. Again, this is mainly driven by companies refusing to integrate SegWit in a timely manner.

At the same time, some people point out it is a good way to store value. If funds are unspendable , it can’t be used to influence the Bitcoin price. It is not a comparison most people would like to see, mind you. This situation isn’t sustainable in the long run and something needs to change sooner rather than later. How this change will be enforced, remains to be determined. Transaction fees are kept artificially high by various entities as well. An interesting situation, although one that will only cause more trouble unless properly resolved.

Within the past week, the percentage of Segregated Witness (SegWit)-enabled transactions in the Bitcoin network has increased from 9 percent to 14.45 percent, decreasing Bitcoin transaction fees, the size of the Bitcoin mempool, and blocks.

In June, prior to the integration of SegWit, the Bitcoin Core development team’s scaling and transaction malleability solution, the size of the Bitcoin mempool remained at over 150 million bytes. Such high level of blockchain congestion and large amount of unconfirmed transactions led to a significant increase in transaction fees.

Since then, as Bitcoin wallet platforms, exchanges, and users continued to adopt SegWit, the size of the Bitcoin mempool dropped from 150 million to 6 million bytes. The average Bitcoin block size also decreased from 1MB to 0.84.

SegWit is a scaling solution that provides more capacity to the Bitcoin network and blockchain by reducing the size of Bitcoin transactions. Unlike a hard Bitcoin block size cap, SegWit scales the Bitcoin blockchain network through user and business adoption. As the transaction percentage of SegWit-enabled payments increase beyond 50 percent, SegWit will allow the average Bitcoin block size to decrease even further, creating a more flexible and scalable Bitcoin ecosystem.

In the past few days, leading Bitcoin wallet platforms such as Blockchain have been recommending an average fee of $0.06 for median transactions, ot 10 satoshis per byte. In June, Blockchain recommended users to attach 400 satoshis per byte fees. Through that metric alone, it is evident that SegWit has had a significant impact on Bitcoin’s short and mid-term scalability.

In the long-term, SegWit will not be sufficient to completely scale the Bitcoin network. Hence, Bitcoin developers and the open-source development community are exploring innovative solutions, both on-chain and second-layer infrastructures, to provide an efficient network for transaction settlement. Ethereum is also taking a similar approach, developing solutions like Plasma that technically function like SegWit; removing unnecessary information and providing more privacy.

The recent surge in the adoption rate of SegWit can be attributed to the integration of SegWit by ShapeShift, one of the most widely utilized cryptocurrency exchanges that accounts for around 3 percent of Bitcoin transactions. As more platforms such as Blockchain and Coinbase integrate SegWit, the size of Bitcoin transactions will decline and eventually, lead to less fees for users to handle.

In August, leading Bitcoin hardware wallet manufacturer Ledger revealed that SegWit will result in around 35 percent reduction in fees for Bitcoin users, due to its mechanism that enables service providers like Ledger to reduce the transaction signature verification period.

“Segwit introduces the concept of block weight which changes the way the transaction size is computed by splitting the signatures in a different area — you can typically save 35% of the fee paid when sending a transaction immediately. When computing a Segwit signature, the previous transactions do not need to be processed by the device, and each input is only processed once during the signature process, leading up to a 60% time optimization in the signature process.”

It is entirely possible that SegWit could reduce Bitcoin fees above the 35 percent mark, if the adoption rate surpasses 50 percent.

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For quite some time now, people have been wondering why is pushing up Bitcoin network fees. For some reason, an unknown entity is trying to up the average transaction cost. It now appears Coinbase is the guilty party. In fact, they are overpaying fees by as much as 10,000%. This is not good news for the company, as they are literally bleeding money.

Paying a too high transaction fee for Bitcoin is never a good idea. In some cases, a  higher transaction fee is more than warranted. This is especially true during times of network congestion. However, there is no backlog right now, meaning there is no reason for a higher fee. Interestingly enough, Coinbase is bleeding money by overpaying network fees right now. More specifically, Coinbase users are bearing these costs, as the company no longer pays for withdrawal fees.

Coinbase Users Pay too Much for Withdrawals

Not too long ago, Coinbase changes their terms of service. More specifically, they now let customers pay for the money they withdraw. However, charging these customers exuberant Bitcoin fees is not the end goal here. For some reason, users are paying 100 times the normal network fee right now. That means Coinbase customers are losing money every time they move money off the platform.

It is unclear if this is a move to ensure people keep their funds in the exchange, though. We do know Coinbase users can’t change the transaction fee themselves. This means it is up to Coinbase to address these problems sooner rather than later. Jameson Lopp noticed someone started broadcasting transfers with too high fees. There is absolutely no reason to charge such high fees. All of the money is being paid out to minors for no good reason.

The bigger question is whether or not Coinbase is even aware of the problem. If they aren’t, they are in for a world of complaints from users. Situations like these also highlight the problem with centralized exchanges. Customers feel they are being treated fairly, but that is not always the case. Right now, these higher fees are equal to as much as 15 Bitcoin per hour right now. Not an ideal situation by any means.

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