Xapo Forwards Miner Fees to Users After a Grueling Two Weeks of Backlog

Last week the bitcoin-based company Xapo has announced the firm will no longer pay mining fees for customer transactions and will forward the cost to users. The announcement comes after a hectic week where over 150,000 to 200,000 unconfirmed transactions filled the network transaction queue (mempool).

Customers of the cryptocurrency service Xapo have received emails from the company stating they will no longer pay customer mining fees. The company follows a few other bitcoin startups such as Coinbase and Bitpay who have also ceased paying user’s transaction fees. “In the next couple of days all Xapo users will begin to pay the miners fees themselves in order to send transactions out of Xapo,” explains the Palo Alto, California-based startup.

“Due to the increase in transaction volume of the bitcoin network, we’d like to give our users some control over their transactions. That being said, Xapo will give you the ability to select which type of fee you’d like to pay.”

Does the Significant Congestion and a Backlog That Won’t Clear Mean Mike Hearn Was Right?

The news follows almost two weeks worth of backed up transactions filling the mempool. Currently, the backlog has over 200,000 unconfirmed transactions at the time of writing and has been this way for the past 36 hours. Two weeks ago the transaction queue started to fill exponentially with over 150,000 transactions piling up and the traditional weekend lulls have done nothing to clear the backlog. In essence, the mempool seems to be growing without any relief in the near future unless a scaling solution appears shortly.

Blockchain.info’s unconfirmed transaction count May 16.

Many bitcoin proponents are concerned that Mike Hearn’s predictions two years ago this month may be coming true. The former bitcoin developer believed at some point a permanent backlog would start to build up leading to crashing nodes, people waiting days for transaction confirmations, and astronomically large fees. “Bitcoin Core has no code in it to handle a permanent and growing transaction backlog,” explained Hearn in May of 2015. “Transactions just queue up in memory until the node runs out.”

Tradeblock’s unconfirmed transaction count is a touch lower at 143,000 on May 17.

Bitcoin Proponents from Both Sides of the Debate Are Complaining About Rising Fees

So far lots of people have been waiting over six hours to three days for one confirmation and have been complaining throughout forums. Furthermore, fees are higher than ever as May 16 reveals many people were paying upwards of $2 per transaction. Last week the average transaction cost for a normal 226KB tx was $1-1.50, and people still criticized wait times. People complaining about rising fees could be seen coming from both small blockers and big blockers over the past week. The news from Xapo is a disappointing reality for many bitcoin enthusiasts, but people understand that a business such as Xapo, Coinbase or Bitpay cannot feasibly cover the rising fees. Until the scaling debate is resolved, bitcoin network users will just have to deal with the current situation and with companies pivoting their business models. However, a resolution is nowhere near in sight.