Bitcoin hits $122K but onchain activity sinks to multi-year low

Despite bitcoin (BTC) hitting a new all-time high this weekend of $122,000, the protocol’s blockspace price is at an all-time low, with demand to transact and store data on-chain trending toward a single satoshi or “sat,” worth a paltry 1/100 millionth of one BTC.

In fact, transaction fees have persisted at such a low level that some developers and node operators are manually overriding their minimum fee acceptance rate to allow users to bid for less than a single satoshi.

Specifically, they want to allow peers to bid less than $0.17 for a standard 140 virtual byte (vByte) Native Segwit transaction.

One sat is a default minimum so low that Core developers have rarely thought it necessary to lower it — until now.

On Friday, for example, the average transaction fee per BTC transaction was less than $1.19 — including the full mix of low, medium, and high priority bids from all users of the Bitcoin network.

Plenty of users had transactions in the mempool bidding the absolute minimum of a single satoshi per virtual byte.

Year to date, demand for blockspace has bottomed out to its worst average rate in years.

Lower the mempool minimum below a single satoshi

Comically, it’s somewhat difficult as a node operator to relay transactions with these embarrassingly low fee rates.

“I don’t want to be forced to pay a 25-cent fee on a completely empty mempool,” wrote senior Bitcoin developer Calle, “if I could have paid five cents.”

Bitcoin developer SuperTestnet agreed, “I am okay with relaxing this filter.”

However, actually modifying Bitcoin node software to accept bids of, say, $0.05 instead of $0.17 requires a little bit of coding skill.

Node operators can modify the minimum fee per vbyte by adjusting their minRelayTxFee variable within their Bitcoin Core software. In fact, they can accept and relay transactions bidding a fee cheaper than even one cent.

Currently, the default value for minRelayTxFee in Bitcoin Core is 0.00001 BTC per kilo virtual byte (kvB), which is equivalent to one satoshi per vByte.

A node operator may specify an even lower minimum via the startup parameter -minrelaytxfee=<amt> or the configuration parameter minrelaytxfee=<amt>.

Read more: Bitcoin nodes protesting OP_RETURN change hit all-time high

Minimal demand for blockspace

Of course, the default value itself matters. Some developers are even considering proposing a modification of this default for upcoming releases of Bitcoin Core software.

However, there isn’t a formal pull request (PR) for this change, nor is there consensus on activating any such change.

Note that the discussion about accepting bids of less than one satoshi is only relevant for mempool policy — the queues of pending transactions relayed between nodes around the world.

The Bitcoin protocol itself will accept validly mined transactions with any bid amount — including zero-fee transactions. Blockspace demand and fees for data storage are ultimately at the discretion of miners.

Indeed, miners occasionally accept payment out of band to mine transactions with 0 BTC in on-chain transaction fees.

Nonetheless, during the regular course of day-to-day business, miners mostly choose transactions from major mempools such as the default Bitcoin Core mempool.

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