The price of Bitcoin may be hovering below $30,000, but network activity is increasing significantly, driven by the recent Taproot upgrade. This innovative update improves the privacy, scalability, and security of the Bitcoin blockchain and introduces the potential for building decentralized applications (dApps) on the platform. As a result, Bitcoin transaction fees have reached their highest point in nearly two years.
Taproot Upgrade: Ushering in a New Era for Bitcoin
The Taproot upgrade significantly enhances the functionality of the Bitcoin blockchain, enabling the development of decentralized applications on the network. By introducing a new signature scheme and flexible transaction structure, the upgrade improves the long-term viability of the Bitcoin blockchain to support the emerging DeFi ecosystem.
According to Glassnode, more than 75% of all Bitcoin on-chain transactions used Taproot on May 7. This is a record high and in stark contrast to just 1.536% at the beginning of the year.
As Glassnode co-founder Rafael Schultze noted, Taproot’s growing popularity has led to a surge in network traffic, more than doubling transaction volume compared to a 2022 baseline.
The increase in network activity has caused average fees to reach their highest point in nearly two years. As a result, Bitcoin miners have seen an increase in revenue. The average fee per Bitcoin transaction rose to $19.2 on May 7, the highest level since April 2021, according to BitInfoCharts.
Bitcoin Mempool Congestion: Potential DoS Issue
On Tuesday morning, there were more than 455,000 transactions waiting to be confirmed in the Bitcoin mempool. While the network congestion can be attributed to the increase in sequence number inscriptions, it has raised concerns about a potential denial of service (DoS) attack on the network.
For example, Binance was forced to suspend BTC withdrawals due to a large number of pending transactions.
Despite volatility, fear, uncertainty, and doubt (FUD), Bitcoin investors appear to be maintaining a bullish stance. Additionally, the number of addresses sending Bitcoin to exchanges has hit a 2-year low of over 3,700, which could indicate that investors are willing to hold onto the asset in anticipation of a new rally.
Taproot’s growing influence on the Bitcoin ecosystem
The Taproot upgrade ushered in a new era for the Bitcoin network, driving a surge in network activity and transaction fees.
As Taproot adoption continues to grow, so too does its impact on the Bitcoin ecosystem.
Bitcoin investors remain optimistic despite concerns about network congestion and potential DoS attacks, which could signal the start of a new rally.
