- BitMEX processes transactions around 13:00 UTC every day.
- Bitcoin network fees increase by as much as 50% between 13:00 and 14:00 UTC
According to new research, BitMex one of the largest cryptocurrency exchanges may be clogging up the Bitcoin blockchain daily, resulting in a drastic increase in transaction fees.
What makes this interesting is the fact that there are many exchanges that output greater transaction volume than BitMEX. However, BitMEX still relies on old transaction protocols resulting in significant network burden.
Bitcoin blocks have a limited memory capacity. With the average Bitcoin block size ranging from 1.0 and 1.5 megabytes, large transactions can quickly back-up the Bitcoin blockchain.
BitMEX transaction sizes are massive compared to traditional transactions. By utilizing uncompressed private keys and not opting for transaction batching, BitMEX transactions occupy more block memory than traditional Bitcoin transactions.
The large transactions have a significant effect on the Bitcoin network. Soon after BitMEX broadcasts its transactions, Bitcoin fees skyrocket as the network suggests a higher fee rate to outbid the BitMEX transactions. The effect lasts throughout the day with fees slowly returning to normal only to surge the next day.
Furthermore, BitMEX users pay Bitcoin network fees when they withdraw Bitcoin. Thus, the exchange doesn’t lose anything from processing high-fee transactions.
How BitMEX Can Reduce Transaction Load
BitMEX can easily reduce their network burden by implementing transaction batching. In short, transaction batching allows multiple transactions to combine within one TXID. This alleviates the amount of space each transaction takes. With Bitcoin only able to handle a maximum of 5 transactions per second (TPS), utilizing batch processing for BitMEX’s transactions can help mitigate the daily fee surge. Coinbase another large cryptocurrency only recently began batching transactions.
In addition to batching transactions, 0xB10C also states that BitMEX can c33 bytes per transaction by compressing private keys. BitMEX can also employ SegWit, which will drastically reduce transaction size.
If Bitcoin is to scale and avoid exorbitant transition fees, exchanges like BitMEX will have to adopt memory saving protocols.
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