Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
The Bitcoin Core software has significantly reduced its default minimum relay fee by 90%, dropping it from 1 satoshi per virtual byte (sat/vB) to 0.1 sat/vB. This update, included in Bitcoin Core 29.1 released on September 4, aims to make Bitcoin transactions considerably cheaper for users while simultaneously maintaining essential denial-of-service (DoS) attack protection for the network.
Key Changes and Developer Rationale
The new default minimum relay fee rate is now set at 100 satoshis per thousand virtual bytes (0.1 sats/vB). Bitcoin transactions are priced based on the number of satoshis paid multiplied by the transaction’s size. While individual node operators retain the ability to customize this setting, most are expected to adopt the new default, which will influence which transactions are relayed across the network.
Bitcoin Core developers made the decision on August 15, citing Bitcoin’s substantial exchange rate appreciation over the past decade as a primary motivator. They noted that the minimum fee primarily serves as a DoS protection mechanism, and with Bitcoin’s current valuation, a lower fee rate is now economically viable without compromising network security.
Addressing Network Efficiency
Beyond cost reduction, the update also addresses recent network efficiency concerns. A Bitcoin Core developer highlighted a trend where transactions priced below the previous 1 sat/vB limit were still being mined. This led to issues with block propagation, as blocks containing numerous sub-1sat/vB transactions did not disseminate as quickly to nodes that had initially rejected or not received information about these lower-fee transactions.
Developers sought to strike a balance, making the default value lower to prevent these block relay problems while ensuring it remained sufficiently high to protect against spam and DoS attacks. This ensures a smoother and more consistent transaction flow across the network.
Node Adoption and Broader Impact
Bitcoin Core remains the dominant node software, with BitRef data indicating that over 72.5% of all Bitcoin nodes utilize it. Bitcoin Core 29 is currently the most popular version, accounting for over 18% of the network’s 24,000+ nodes. Notably, while Bitcoin Knots 29.1 is based on Bitcoin Core 29.1, it does not automatically adopt these new default fee settings.
The move aligns with broader calls for more efficient fee structures within the Bitcoin ecosystem. Network data service Mempool.Space, for instance, has actively advocated for lower fees, advising users to avoid overpaying for transaction processing.
Outlook on Transaction Costs
This significant reduction in the default minimum relay fee is poised to reduce the economic barrier for everyday Bitcoin transactions. By adjusting to current market realities and addressing network propagation issues, the update aims to enhance the overall usability and efficiency of the Bitcoin network for its users.
