Facing record high network transaction fees, Bitpay has announced that it will add a fee to each Bitpay invoice, beginning next week. While merchants’ fees will not be affected by this change, a purchaser paying a Bitpay invoice will see an “automatically-calculated (based on current network fee estimates) network cost” shown as a part of the total amount to be paid, the company explained.
Also read: Bitpay Confident in Bitcoin, But Raises Its Minimum Transaction Size
New Fees on Bitpay Invoices
Starting on March 23, a new fee will be added to each Bitpay invoice to cover the rising transaction costs of the Bitcoin network. Many businesses currently use Bitpay’s invoice service, which is a customizable API-based system capable of creating and sending multiple invoices to customers. It is still free for payees to receive money using the invoice service. However, payers will see the miner fees added to the total amount to be paid.
“Until now Bitpay has covered the network costs for combining and sweeping UTXOs [Unspent Transaction Output Set] from Bitpay invoice payments”, the company revealed.
Recently, Bitpay CEO Stephen Pair spoke about the Bitcoin network’s mining fees rising “exponentially”. He said that the fees that Bitpay covered for customers in February crossed the $50,000 mark, prompting the company to raise the minimum invoice amount from $0.04 to $1. With this latest announcement, Bitpay stated that:
In order for us to continue processing secure, on-chain bitcoin payments without incurring losses as UTXO consolidation costs increase, as of March 23rd we will now be automatically adding this network cost to the total cost of paying a Bitpay invoice.
UTXO-Based Network Miner Fees
“The miner fees paid to combine and sweep UTXO’s from Bitpay’s receiving addresses are a major part of Bitpay’s increased network costs”, the company described. Instead of simply passing along the payments’ network miner fee, Bitpay has decided to charge fees based on the number of UTXOs which a payment is sent from.
Each UTXO points to a single Bitcoin address that a wallet could choose to send bitcoins from. It is also the part of a Bitcoin transaction that tells the network how much unspent money is at each sending address.
Wallets commonly have dozens of addresses that make up part of each payment sent. A typical spend from most wallets can stack many addresses together to total up the amount being sent. A payment might only have one UTXO or it could have hundreds of these addresses. Bitpay’s invoices will be charging for each one individually. These fees are added to the invoice on top of the payer’s own miner fee which originates in the payer’s wallet, giving Bitpay no control over them. The company admitted:
We realize that for many users, this network cost may make smaller payments uneconomical.
How to Minimize Fees
For users who are concerned about additional network costs on their Bitpay payments, the company said that they “strongly recommend making Bitcoin purchases in larger increments to offset the cost across a larger payment value”. In addition, Bitpay also suggested that, to avoid double-paying the network fees, “be sure to pay the exact BTC amount requested on the Bitpay invoice”. In addition, the company noted that: “A good way to ensure that you do not overpay or underpay a Bitpay invoice is to scan the QR code or pay with a payment-protocol compatible wallet like the Bitpay wallet app”.
Bitpay concluded that “This network cost will not have a significant effect on the majority of payments made through Bitpay”. While purchasers will see the added fee, “our merchants’ fees and pricing will not be affected by this change”, the company reiterated.
What do you think of Bitpay’s move to add miner fees to their invoices? Let us know in the comments section below.
Images courtesy of Shutterstock and Bitpay
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