High Bitcoin fees are causing a stir, but one expert sees them as a necessary consequence of the digital coin’s design.
In an insightful op-ed penned for CoinDesk, Nic Carter, partner at Castle Island Ventures, a Massachusetts-based public blockchain-focused venture fund, delved into the controversial topic of Bitcoin transaction fees. Carter, a recognized figure in the crypto space, robustly defends the existence of high fees in Bitcoin, challenging the notion that Bitcoin should strive for perpetually low fees.
Carter draws upon the historical divide between the Bitcoin community members, colloquially referred to as “small-blockers” and “big-blockers”. The former support higher fees as a trade-off for decentralization, while the latter advocate for lower fees and larger block sizes. He observes a recent reversal of this trend, with some Bitcoin supporters now calling for reduced fees.
The rallying cry for low fees, according to Carter, has been reignited by Bitcoin’s Taproot upgrade, which inadvertently created a new space for users to add arbitrary content to the blockchain. This development led to a surge in demand for Bitcoin blockspace, notably for the creation of BRC-20 tokens and image NFTs, or “Ordinals”, which have led to a spike in transaction fees.
While critics have bemoaned this development, citing it as a potential denial-of-service attack, Carter has a different perspective. He argues that high fees are an integral part of the Bitcoin design and are essential for miners’ compensation as block rewards continue to decrease.
Carter dismisses the idea that Bitcoin is obliged to provide persistently low fees. He argues that the decision to cap block space, thus leading to increased fees during periods of congestion, was a deliberate move made by the Bitcoin community to ensure cheap validation and maximal decentralization.
The venture capitalist makes a case for the need to tolerate larger fee spikes when the blockchain gets busy, an approach he argues is in line with traditional payment systems which defer settlement. He champions the “small blocker” philosophy, stating that he believes these more creative uses of block space could be the path to Bitcoin’s sustainability.
While he acknowledges the valid concern of high fees pricing out individuals, especially those in developing regions like El Salvador and Africa, he maintains that this is an unavoidable consequence of the Bitcoin design, which was explicitly designed to prioritize inclusivity and decentralization over low fees.