The world's largest cryptocurrency exchange, Binance, recently paused bitcoin (BTC) withdrawals due to congestion on the Bitcoin blockchain. While withdrawals have now resumed, the problems plaguing the Bitcoin protocol continue to linger.
On Sunday morning, U.S. time, Binance tweeted that it was temporarily suspending BTC withdrawals. The move came as the Bitcoin blockchain became overwhelmed with pending transactions and sky-high fees. Within two hours of its initial tweet, Binance announced that it had resumed withdrawals.
On-chain data shows that there are currently nearly 400,000 unconfirmed Bitcoin transactions, which is higher than anything seen during the bull runs of 2018 and 2021. The average transaction fee has also doubled since March, pushing it to a two-year high. The current transaction fee is just over $8, which represents a 309% change from a year ago.
Colin Harper, head of content at Luxor Technologies, a full-stack Bitcoin mining pool, has said that the current fee spree is an anomaly. He noted that the biggest difference between this jump in transaction fees and past ones with inscriptions is the adoption of the BRC-20 standard, a new way to inscribe tokens. The adoption of this standard is driving fees up.
Currently, BRC-20 standard inscriptions have a market cap of $482 million across 14,000 tokens. These tokens are being used for a variety of purposes, from simple cryptocurrency transfers to more complex smart contracts.
The Binance incident highlights the ongoing issues with the Bitcoin protocol. Despite its popularity and widespread use, the protocol has struggled with congestion and high fees for some time. While there have been attempts to address these issues, such as the implementation of the SegWit soft fork, progress has been slow.
One proposed solution to the congestion problem is the Lightning Network, a layer-2 scaling solution that uses smart contracts to allow for instant, low-cost transactions. While the Lightning Network has seen some adoption, it has yet to become widely used.
Another proposed solution is the use of sidechains, which are separate blockchains that are pegged to the main Bitcoin blockchain. Sidechains can be used for a variety of purposes, from faster transaction processing to the creation of new tokens.
Despite these potential solutions, the Bitcoin protocol remains congested and fees remain high. This has led to frustration among users and businesses, as well as calls for further improvements to the protocol.
In the short term, however, users and businesses will need to deal with the current congestion and high fees. This may mean using alternative cryptocurrencies or payment methods, or simply waiting for the congestion to subside.
Overall, the Binance incident highlights the ongoing challenges facing the Bitcoin protocol. While it remains the most popular and widely used cryptocurrency, its scalability issues must be addressed if it is to continue to grow and evolve.
