Bitcoin Transaction Fees to Be Cut Tenfold

Bitcoin transaction fees will be reduced tenfold due to the relatively high value of the digital currency, as the promoters try to encourage merchants to go for the cheaper payment alternative.

CoinDesk reported that bitcoin developers are planning a cut in transaction fees from the current average of 5 US cents (£0.03, €0.04) to half a cent.

Transaction fees are small amounts paid to send bitcoin transactions around the digital currency network and to get miners to confirm them by including them in a mining block. They are paid in satoshis – tiny amounts of bitcoins.

The last reduction in transaction fees happened about six months ago, from 50k satoshis to 10k satoshis.

There are two thresholds to meet when creating a bitcoin transaction and deciding what fee to charge, CoinDesk reported, citing core developer Jeff Garzik.

"The first enables the network to relay your transaction, while the second persuades bitcoin miners to include your transaction in a block that they are mining. The first must occur before the second, so that the transaction gets to the miners in the first place."

"In order to avoid spam, there is a hardcoded minimum, to avoid relaying transactions across the payment network that will never confirm (due to low fees or other reasons)," said Garzik. "This anti-spam minimum had not been adjusted since before the large price increase. Now, it's been adjusted."

However, developers noted that lowering the relay transaction fees could open the door to denial of service attacks.

Bitcoin has steadily been gaining in popularity despite the volatility in its value. The virtual currency exists as software and is not backed by any country or banking authority.

It was launched in 2008 and is traded within a global network of computers. They can be transferred without going through banks or clearing houses, reducing fees involved in the services significantly.

It peaked at $1,250 in November 2013, but plummeted due to a number of adverse events. It is currently trading at $568.74, according to CoinDesk bitcoin price index.

An increasing number of merchants are accepting the digital currency at present, boosting investors' morale.