Exchanges overloaded. DDoS attacks. Huge price spikes, flash crashes, and order cancellations. Over 200k transactions queued, some for more than 24 hours, in the mempool – despite paying high fees. Just another crazy day in bitcoin, a land where every day seems to be wilder than the last, including higher highs, bigger swings, and record-breaking numbers across the board.
Are You Not Entertained?
Amidst all the frenzy over the price of bitcoin, it’s easy to overlook its use as a means of exchange that hundreds of thousands of people rely on. The digital currency’s dollar value has grabbed most of the headlines, but behind the scenes there’s been another story: one of a huge backlog that’s seen bitcoin become temporarily non-transactable.
Within the last 24 hours, total bitcoin trading volume has neared $29 billion, a five-fold increase on the same time last month. Bitcoin trading on exchanges doesn’t impact on the blockchain itself because all of the action takes place off-chain. Nevertheless, the record demand for the cryptocurrency and huge trading volume indirectly takes its toll, as users wait to send money in and out of exchanges. If bitcoin mania continues at its current rate, it won’t be long before the 24-hour trading volume exceeds the $50 billion daily average set by the New York Stock Exchange.
Bitcoin Up, Everything Else Down
In the last 12 hours, virtually every single altcoin has been in the red as the flight to bitcoin has intensified. It’s not just altcoins that have been down however: so have many of the exchanges that list them. Coinbase – where bitcoin soared to almost $20,000 at one stage – went offline on December 7, as its engineers continued to wrestle with the problem of how to scale a site which is a victim of its own success.
Bitcoin has certainly kept the pundits busy this week, with mainstream media scrambling to obtain soundbites on where the virtual currency’s at, where it’s headed, and what comes next. Former hedge fund manager James Cramer perhaps put it best on CNBC:
I don’t want to talk about when the party is going to be over because maybe the thing is going to Mars. Maybe the thing is going to Jupiter.
Meanwhile, Royal Bank of Scotland chairman Howard Davies was dismissing the whole thing as “irrational exuberance” and urging exchanges to defer introducing futures trading. His sentiments were drowned out, however, by the crackle of popcorn as the bitcoin rocket put more distance between itself and humanity.
Transactions Are Drowning in the Mempool
Earlier this week, bitcoiners had an opportunity to laugh at ethereum, whose mempool has been clogged by the viral success of Crypto Kitties, which has now taken in $6.7 million and sent gas fees to record highs. On Thursday it was bitcoin’s turn to experience a mega backlog due to the viral success of bitcoin. Despite paying “fast” fees of $7, many users complained of seeing their transactions sat unconfirmed in the mempool for 24 hours or more. Fees of as much as $32 have been reported however. “F*** you bitcoin” as one reddit user pithily put it. Elsewhere, r/bitcoin barreled past half a million users, r/btc shot past 100k, and Bitcoin Core began trending on Github as the bitcoin frenzy permeated every corner of the web.
Bitstamp is normally the most conservative exchange when it comes to the price of bitcoin, but for a while today it was Bitfinex which lagged behind, with the currency trading at significantly less than on other exchanges. The wildly diverging price of bitcoin on major exchanges created huge arbitrage opportunities theoretically, but in practice no one was able to benefit from them due to the mempool being clogged.
Bitfinex has been subjected to a spate of alleged DDoS attacks over the past week, and today was no different. GDAX, meanwhile, was knocked offline for a while, but not before bitcoin was fleetingly trading on there for $3,000 more than on Bitfinex. Elsewhere, Korean buyers have been paying a premium of over 20% for bitcoin, it’s been reported.
As the price of bitcoin has rocketed, accelerating sharply since the start of November, there’s been a growing consensus that the currency is best used as a sort of savings account rather than a means of purchase. One place where bitcoin is still relied on for buying and selling, however, is the darknet. Users on r/darknetmarkets complained, like everyone else, of transactions sitting unconfirmed for 15 hours or more. While the general public wants a slice of the digital gold rush, all the deep web’s longstanding users want is a little something for the weekend. Like everyone else, they’re going to have to wait.