What Is Network Congestion?

As covered earlier, network congestion leads to higher transaction fees.

When you send cryptocurrency, the transaction doesn’t confirm instantly. Instead, it goes to a place called the ‘mempool’. This is short for ‘memory pool’. Think of the mempool as a waiting room where transactions go before they get added to a block in the blockchain.

When the network is very busy, there are more and more transactions waiting to be confirmed, so the waiting room gets crowded. This is why in peak times your transaction will typically take longer to go from ‘pending’ to ‘confirmed’. In other words, there’s a backlog of pending transactions and yours is one of them.

You can speed up your wait time by paying a higher transaction fee prior to initiating a transaction or you can opt to pay a lower transaction fee if you don’t want to spend much on fees and don’t need the transaction to be confirmed urgently. Note, a transaction can take many days to confirm if the fees you set are too small.

For example, when bitcoin reached more than $20,000 in 2017, the Bitcoin blockchain network got very congested. With so many people wanting their transactions to get confirmed quickly, fee prices sky-rocketed to an average of more than $50 per transaction. Whilst this is rare, this highlights the importance of blockchain’s ability to scale in order to be able to service greater demands of usage.

Several online services let you track network congestion before setting your maximum fee and initiating a transaction. ETH Gas Station and BTC Network, respectively.

These services typically provide calculators that show how congested the networks are and provide approximate calculations of expected fees that would be required to see a transaction confirmed depending on how quickly you want it confirmed.

For example, if you want a BTC transaction to be confirmed as quickly as possible (i.e. within the next block or ~10 minutes), then a calculator may leverage the existing network congestion to estimate that a fee of 0.00021774 BTC or $2.38 AUD (example only) would be necessary to confirm the transaction in the desired time, whereas if you were willing to wait 12 hours for the transaction to confirm, it may suggest a fee of 0.00000954 BTC or $0.10 AUD (example only).

All the pending transactions can’t be confirmed at once, because a block can only hold so many transactions. In the case of Bitcoin, blocks have a capacity of 4 megabytes. In the next 2 topics, we cover how transaction fees apply to both the Bitcoin and Ethereum blockchain.