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Online Wallet Coinbase Will Not Pay For On-Chain Fees, Forwards Cost to Customers


Over the course of the past six months, bitcoin miner fees have spiked significantly causing on-chain transactions over the network to be more expensive. Last week Bitcoin.com reported on Bitpay raising the cost of the company’s invoice rates to cover miner fees. Now Coinbase has announced their service will discontinue paying network fees and the cost will be passed on to customers.


Companies Are Pivoting Their Business Models Due to Transaction Fees

Coinbase Will Not Pay For On-Chain Fees Forwards Cost to CustomersOn-chain transactions are costing more these days, as the normal miner’s fee is roughly 69 cents per transaction at the time of writing. Many bitcoin proponents have shrugged off the issue as they believe it’s the price one must pay for a decentralized payment system. However, bitcoin-based businesses seem to be having a hard time paying on-chain transaction fees and have begun to switch their business models.

This past January the freelancing website Fiverr detailed it would stop accepting bitcoin for its services. Bitcoin proponents speculated the company may have ceased operations due to slow transaction times and higher fees. In February some bitcoiners received an email from the company Egifter stating they would only accept bitcoin transactions from Coinbase. Again community members speculated the reason was due to transaction costs and speculated that Coinbase would help the business settle off-chain.

Following these announcements the bitcoin payment processing company Bitpay revealed it was raising the price of the company’s invoices. Bitpay explained:

[Effective tomorrow] we’re raising the Bitpay minimum invoice amount from $0.04 to $1.

Coinbase Begins ‘Spring Cleaning’

Coinbase Will Not Pay For On-Chain Fees Forwards Cost to CustomersOn March 14 the San Francisco-based bitcoin exchange and brokerage company Coinbase announced the company would stop paying on-chain transaction fees. These fees will be forwarded to the customer and assigned dynamically for customer withdrawals, the business detailed;

“Network transaction fees: We will discontinue paying network transaction fees for on-chain transactions starting March 21st, 2017,” explains Coinbase. “We now have over 6 million users worldwide, and this has become a significant cost. Fees will be assigned dynamically based on the current network conditions and will be paid by customers when they send an on-chain transaction. Transactions between Coinbase accounts will continue to be off-chain and free.”

Bitcoin companies have begun to protect themselves from the rising fee market. At the rate the fee market is growing, many more bitcoin-based businesses may realign their business models in the future to offset costs.


What do you think about bitcoin companies forwarding fee costs to their customers? Do you think the fee market is hurting cryptocurrency businesses? Let us know in the comments below.


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