LocalBitcoins Institutes New Fee System
Finland bitcoin startup LocalBitcoins is introducing a new transaction fee system to meet rising bitcoin network fees. The new fee system will be put into effect next week.
LocalBitcoins claims that under its old transaction fee system, users pay a transaction fee when they send bitcoins out from LocalBitcoins to a different bitcoin wallet. In the bitcoin network, managing deposits uses up a lot of blockchain space, while handling a withdrawal uses up much less space. This means that a large part of the old bitcoin transaction fee was used for covering costs related to deposits. This means that customers who make many small deposits to their LocalBitcoins wallet cause the sending transaction fees to rise, and these costs were paid by customers who were sending bitcoins.
LocalBitcoins said that in order to divide the costs of handling bitcoin transactions in a fair manner, they are introducing deposit fees for incoming transactions. The company said deposit fees will be dynamically adjusted and based on how congested the bitcoin network is. Deposit fees will be larger than the new sending fees, coming in at about 3x the amount of sending fees. The fees should get smaller in the long run, as it makes less sense to make small deposits, which increase the fees for all users.
Thus, the new transaction fee system outgoing transfer fees will be smaller than with the old bitcoin transaction fee system. According to the company, users can save further on the sending fee by timing their transaction to when the network is quiet.
“We want to spread these costs more fairly between our customers,” said LocalBitcoins founder Jeremias Kangas. “By introducing deposit fees, customers who make many small deposits will pay a larger share of the overall transaction costs, and customers who send out transactions will enjoy lower fees.”
