Note: To our customers experiencing delays receiving their Bitcoin purchases, this article attempts to explain what is going on "behind the scenes" and what causes these kinds of delays. Regardless of the cause, you will receive your bitcoin as soon as possible. If you're curious, however, please read on....
Bitcoin Cash (BCH) forked from Bitcoin back on August 1st, 2017 and has since become the one of the top cryptocurrencies by market cap (currently 3rd after Ethereum). Everyone holding bitcoin as of August 1st (Bitcoin block 478558) also received an equivalent amount of Bitcoin Cash. 1 BTC for 1 BCH. While there are aspects of Bitcoin Cash that are different than Bitcoin, what I wish to focus on is their similarities. Particularly one similarity: The way they create blocks.
Bitcoin verifies and secures transactions by ordering them into "blocks" which are then arranged and linked together in a series. This whole construct is know as a blockchain and is one of the innovations that made Bitcoin possible. The specialized group of people who actually generate new blocks are known as Bitcoin miners and run equipment specifically designed to create Bitcoin blocks. The main reason these miners create blocks is to earn a reward of 12.5 newly generated bitcoin for every block they create!
Bitcoin and Bitcoin Cash both generate blocks the same way using the same algorithm (SHA-256). The reason this is important is because a Bitcoin miner can easily switch between creating Bitcoin blocks and creating Bitcoin Cash blocks. This has turned out to be problematic for both chains.
Why would a Bitcoin miner mine Bitcoin Cash or vice versa? The primary motivation is whichever chain is more profitable to mine. The price of each coin is a critical factor (for determining revenue), while the network difficulty of each chain is the other critical factor (for determining costs). There are more details to go into here, but suffice it to say that a large amount of the mining capacity on the Bitcoin network actually does switch to mining Bitcoin Cash whenever the latter is more profitable (which has been only for brief, but recurring periods up to now).
At Athena, we've been noticing some interesting effects on the main Bitcoin network whenever the mining power (or hashrate) switches to Bitcoin Cash. Unfortunately, these effects have had negative consequences for our customers....
When Bitcoin transactions are sent out to the network from one of our services or from your individual wallets they are added to a pool of unconfirmed transactions waiting for inclusion in a Bitcoin block. As we discussed above Bitcoin blocks are created by miners. If a large portion of the hashrate moves over to Bitcoin Cash for even a short amount of time there will be fewer Bitcoin blocks generated while they are away. Fewer blocks means less transaction capacity. Bitcoin can only hold so many transactions per block (a subject of much debate over the past few years). If there are fewer blocks generated per hour but just as many new transactions generated in that same hour, then those transactions that don't fit in the available block space will just "pile up" in the mempool waiting for their turn. This is what the chart is showing you above. The peak to the right was captured during mid-afternoon on Saturday, November 11th.
The New Normal
We've covered periods of high congestion before at Athena. They have become much more common this year as Bitcoin's popularity exploded. More people = More transactions. Transaction fees also tend to increase during these periods in order to bid for the more limited block space. In addition, those that do send transactions with fees that previously worked fine end up having to wait many hours if not several days for their transactions to confirm!
What's new since Bitcoin Cash was created is that these congested periods also occur, not necessarily because the number of Bitcoin transactions increase, but rather because the rate of Bitcoin block creation drops as miners temporarily move over to Bitcoin Cash. You can see this back-and-forth swing of the hashrate here.
If you have a pending transaction out there just keep in mind there is, unfortunately, nothing to do but wait for it to be included into a block. Frequent users of Bitcoin should anticipate that sometimes the network is going to be much slower than you're expecting.
Question about a particular transaction you have pending with us? Please send us a message!