Since last year, transaction fees have been lower than they were in the last bull run. Right now, they’re still cheap, while in the past they sometimes went over $100. What caused this change? Will low fees last, or will they rise again if Bitcoin’s price jumps?
It is a combination of network demand, scaling solution adoption, and behaviour of transactions. In the previous bull run, the queue of unconfirmed transactions (mempool) was sometimes filled with transactions. No one was willing to wait to have his transactions approved and that bidding war pushed fees as high as $100 at one point. Since that time a few factors have assisted in reducing the fees.
A large one has been the adoption of SegWit. SegWit addresses make the transactions smaller, thereby limiting the amount of space they occupy in the blocks, thus minimising costs. Exchange and service transaction batching also aids: the exchanges and services do not transmit hundreds of discrete transactions but rather bundle them together. And the Lightning Network also begins to process smaller payments off-chain, which puts additional load on the main chain.
Will low fees last? Partly it is a matter of activity. Should the price of Bitcoin skyrocket and the on-chain transactions explode such as they did during the last bull market, fees may once again increase but this time likely not to the magnitude we have previously seen, courtesy of these scaling solutions. Currently, the system is more effective and daily transactions are significantly cheaper than they were before.