A rapid growth in meme coins issued on the Bitcoin blockchain has caused a surge in transaction fees and disrupted withdrawals from Binance.
The growth in Bitcoin transaction fees has in recent days gone parabolic, with the average fee level hitting as high as $19 on Sunday and then $30.9 on Monday this week, after staying between $1 and $2 for much of the year.
Fees on the Bitcoin network have not been this high since the major crypto bull market in the spring of 2021, data from BitInfoCharts shows.
The surge in the fee level caused Binance, the world’s largest crypto exchange by trading volume, to suspend Bitcoin withdrawals on Sunday, saying on Twitter that it needed to adjust fees and work through a transaction backlog before withdrawals could be resumed.
In a separate update on Monday, Binance explained that its “set fees did not anticipate the recent surge in BTC network gas fees.”
“We’re replacing the pending BTC withdrawal transactions with a higher fee so that they get picked up by mining pools,” the exchange said, while also revealing that it is working on enabling withdrawals via Bitcoin’s second-layer Lightning Network.
Bitcoin meme coins and Ordinals
The explosion in Bitcoin fees are widely believed to be caused by a massively popular meme coins that have been issued on the Bitcoin blockchain recently, including new and popular meme coins like Pepe and Ordi.
Dubbed BRC-20 tokens, the tokens have capitalized on a growth in Bitcoin-based non-fungible tokens (NFTs) called Ordinals, which compete with regular Bitcoin transactions for scarce blockspace on the Bitcoin blockchain.
The Bitcoin transaction fee at any given time is essentially the price for blockspace at that time, and high demand for space due to Ordinal NFTs or meme coins taking up space will lead to higher prices.
“Massive run up in network fees”
Commenting on the sharp rise in Bitcoin transaction fees, Hayden Hughes, co-founder of social-trading platform Alpha Impact, told Bloomberg on Monday that Ordinals have caused a “massive run up in network fees and congestion.”
He further explained that this caused Binance and other exchanges, which typically operates with fixed fees for withdrawals, ran into trouble since the fees they charged users fell short of the actual network fee.
“The queue of transactions pending verification for inclusion in the blockchain has experienced significant growth in recent days, causing an increase in transaction fees and confirmation times,” Hughes said, echoing Binance’s statements on Twitter.