As Bitcoin Beats $10,000, Nigeria Transaction Fees Spike - Sundiata Tech

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Wednesday, November 29, 2017

As Bitcoin Beats $10,000, Nigeria Transaction Fees Spike

Bitcoin price finally beat the $10,000 mark on Tuesday morning, reaching $10,099.80 on the Coinmarketcap.com Index.
However the cost of transactions is keeping some potential local investors away as last week’s data showed that volumes in Nigeria declined to N1.393 billion from N1.575 billion it saw two weeks ago.
The price of bitcoin briefly topped $10,099.80 setting a new all-time high on Coinmarketcap Index, yesterday representing a 23.70 percent increase in the past seven days.
It however dropped marginally following profit taking by investors to $9,905 on the Coindesk Bitcoin Price Index.
However while exchanges in many parts of the world were celebrating impressive uptake in demand of the crypto currency, the Nigeria market was a different scenario.
Analysts at Nigerian-based bitcoin platform, Naira Exchange (nairaex) told BusinessDay that the main problem customers and retailers were encountering were the rising transaction fees which have become costly for everyday users.
Tim Akinbo, co-founder of local bitcoin exchange, Tanjalo.com explained that bitcoin fees are charged as a function of the amount of data users store on block chain.
For instance, for every byte a user stores, he or she pays a fee. In essence, a user can pay more for a smaller value transaction than a larger value transaction given that it depends on the amount of data used in the transaction.
Additionally, bitcoin fees are denominated in bitcoin and not USD or some other fiat currency so when it cost 0.0001 bitcoin for a transaction two year ago, it probably cost the same for the same size of transaction today but due to the fact that the USD price of bitcoin has gone up, the fees have also risen.

“Bitcoin is not the same two years ago as it is today, hence the notion of high fees,” said Akinbo.

“Another way of seeing it, is demand. Bitcoin miners prioritise which transactions are confirmed first based on a bid process. Those paying a higher fee get to be included first before those paying a lower amount. In a situation where there are more transactions waiting to be confirmed than there are those getting confirmed, individuals start to outbid each other to get their own transactions included first, this ends up creating a fee market.”
Luno, an international exchange with an outpost in Lagos, Nigeria told BusinessDay that the number of adoption on its platform has however been on the increase. According to the Country Manager, Owenize Odia, the interest in bitcoin is higher at the moment than it has ever been.
“The price is at an all-time high. Customers are signing up with Luno (and searching for Bitcoin on Google) and people are trading and sending more bitcoin than most times in the past,” Odia said.
She however confirmed that fees were rising as a result of rising transactions which has slowed the bitcoin network.
“This means that it might take longer for transactions to be processed. The only way to ensure that these transactions process faster is to increase the transaction fee when sending bitcoin.
“At Luno, we determine the transaction fee dynamically. This means, when the network congestion is low, we pay smaller network fee and when the congestion is high, we increase the fee. This is to ensure reliability and timeliness of sending bitcoin. That said, the transaction fees have increased a lot in recent times, sadly that is completely out of our control,” she said.
To mitigate the impact of rising fees, Akinbo of Tanjalo.com recommended that individuals choose their fees depending on their perceived priority.
“If I’m sending money to a relative and can afford to wait for a day before they get confirmation, I should not choose a high priority fee. This behaviour can actually help to (in the long run) drive fees down,” he said.
Nairaex another local Bitcoin exchange also said they are expecting scaling solutions such as the lightning network to bring back low fees for smaller transactions. We must wait to see if the implementation does go according to plan as the technology is unveiled.

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