Efficient transaction processing is a critical issue for all blockchain applications, even beyond crypto transactions. Blockchain technology is being adopted and integrated into various industries; however, it’s efficiency depends on optimal scalability.
It is essential for transaction processing to ensure high throughput, low latency, and lower transaction fees.
Achieving optimal scalability without compromising decentralization and security (the blockchain trilemma) is a common talking point in blockchain debates. Many developers and experts want the blockchain to scale for hundreds of thousands of people per second to facilitate real-world adoption.
However, while blockchain scalability is still being worked on by various developers, it is still possible to encounter network congestion while executing crypto transactions.
In this article, we’ll discuss the concept of network congestion, what causes it, how it can affect your transactions, and how you can mitigate these effects.
What Is Network Congestion?
Network congestion on a particular blockchain occurs when the number of transactions submitted to that blockchain network exceeds its capacity to process them as due.
To break this down further, we need to understand how the blockchain works.
A blockchain is essentially a collection of blocks that are connected infinitely to each other, each block containing transaction data created by users.
Using Bitcoin as an example, when a transaction is broadcasted on the Bitcoin network, it doesn't get added to the blockchain immediately. Instead, it first goes into the mempool, where all pending transactions can be found. So, from the mempool, miners select and verify transactions and include them in new blocks to be added to the blockchain.
These blocks are propagated across a decentralized network of nodes, each storing a copy of the blockchain. So, if the mempool becomes overloaded and miners have too many transactions to process, then congestion becomes inevitable.
Factors That Cause Blockchain Network Congestion
Typically, many people believe that high transaction volumes are the major driver of network congestion. However, transaction volumes being too high for a particular blockchain network depends on the blockchain’s structure. Specifically, it’s block sizes and block times.
- Small Block Size: With more people submitting transactions to the blockchain, the number of unconfirmed transactions in the mempool could exceed what can be included in a single block, especially for blockchains with smaller block sizes. For example, Bitcoin’s block size is limited to only one megabyte (1 MB), while Solana’s block size is 128 MB.
- Slow Block Times: A blockchain’s block time refers to how often a new block is added to it.
The faster the block time, the more transactions will be taken out of the mempool, and consequently, the lesser the congestion. For example, Bitcoin adds a new block about every 10 minutes, Ethereum adds a new block every 15 seconds, and Solana adds a new block every 0.4 seconds.
Hence, this provides perspective on which blockchain is likelier to suffer congestion when there is a surge in transactions.
Beyond these two factors, networks with lower latency and higher bandwidths can also process transactions more quickly, thereby eliminating congestion.
How Can Blockchain Network Congestion Affect Your Transactions?
Blockchain network congestion can cause several bottlenecks that affect your transactions. Some of them include:
- Delayed transaction confirmation times: When the network is congested, it may take a longer time to confirm and finalize transactions. In some cases, transactions might not get confirmed for several hours, days, or even more. This can be frustrating for users, affecting their experience and potentially reducing the adoption and ease of use of the blockchain.
- Market volatility: Congestion can increase uncertainty and contribute to fluctuations in the market. If many users want to sell a cryptocurrency, but the network is too congested to process these transactions, users may feel anxious and rush to sell their holdings quickly, by any means possible; this could also lead to scams.
- Increased transaction fees: Miners are motivated to prioritize transactions with higher fees. So, when a blockchain network experiences congestion, users often have to pay increased transaction fees to encourage miners to prioritize their transactions. This can make using the blockchain more costly than usual, especially for smaller transactions.
Mitigating High Transaction Fees With Cwallet - Even During Network Congestion
Technically, you cannot complete a transaction without paying at least one fee (which is the network fee). The network fee is unavoidable because it is paid to the transaction validators, without which the transaction won’t be present on the blockchain. However, depending on your service provider, you may avoid some other fees or at least pay infinitesimal fees that won’t affect your profits.
Network fees aren’t paid to exchanges; instead, they are fees paid to the validator (miner/staker) on the blockchain; this helps to reward people maintaining the blockchain as well as securing the blockchain network. The more scalable a blockchain is, the cheaper the network fees. Network fees on some blockchains may be smaller than a cent, while they could be worth hundreds of dollars on less scalable networks.
How Cwallet Can Help You Eliminate Network Fees
Cwallet is a user-friendly crypto wallet that offers several features to ease the process of crypto transactions for all users.
Upon signing up on Cwallet, you will be issued a unique Cwallet ID that allows you to make gas-free transactions with other Cwallet users using their Cwallet IDs.
Hence, irrespective of network congestion or gas prices, you can easily send and receive cryptocurrencies and NFTs from other Cwallet users without incurring any gas fees. Most importantly, Cwallet charges no fees for all of its services, so you need not worry about hidden fees. The service is absolutely free to use.
Despite the progress made in blockchain technology to address the blockchain trilemma, network congestion remains a potential hurdle, impacting transaction confirmation times, market volatility, and transaction fees.
It's not only important to understand the factors that contribute to network congestion, but to apply this knowledge to navigating blockchain transactions.
Above all, you can enjoy gas-free transactions with fellow Cwallet users, even amid extreme network congestion. It only takes a few seconds to create a Cwallet account; get started now!