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Is it only because LTC doesn't have as many users as BTC? Or do the faster confirmation times also help with lowering fees?
Thanks
Why does Litecoin have lower transaction fee than Bitcoin?
Answers
2
Litecoin's blockspace supply is greater:
- Litecoin's block interval is a fourth of Bitcoin's at 2.5 minutes
- SegWit is activated, limiting blocks to 4MB weight instead of 1MB size. With leisurely adoption of the new segwit transaction format this would eventually allow a capacity equivalent of blocks with ~1.7-2.3 MB size.
Litecoin's blockspace demand is much lower:
- Bitcoin does about 250k transactions per day with the mempool never completely flushing out, Litecoin has just slightly over 19k, while it could do about 2,000k.
Bitcoin is operating with demand exhausting the supply continuously, thus finding actually a price for blockspace. In the past months we've seen feerates move between 1 and 540 satoshi/byte. Now that the latest hype has cooled down slightly, we can observe a daily and weekly cycle, under the week going from ~8 to ~400 satoshi/byte, dropping down to as low as 2 satoshi/byte on weekends.
On the other hand, Litecoin is operating with demand at approximately 1% of the supply. Miners appear to be observing a hard coded minimum fee of 100 litoshi/B.
So basically it's because they have less users on the platform? If LTC also had a similar amount of users as BTC, then it would have similarly high transaction fees? – student77 – 2017-06-26T18:16:15.467
@student77 The price of transactions is subject to supply and demand just like a service on any other market – MrJLP – 2017-06-26T18:20:30.000
Yes, blockspace supply on LTC is factor ~4-8 higher, and demand is factor 10 lower. If these were getting closer, LTC would also transition to a fee market instead of their flat fees. – Murch – 2017-06-26T18:22:13.447
Ok so to clarify: if LTC had the same number of users as BTC, then LTC would still have lower fees because blockspace supply is greater? That is the main long term differentiator in transaction fees? – student77 – 2017-07-02T20:25:21.353
If LTC had a similar amount of users as BTC, they'd have a fee market. Likely the market would find an equilibrium at a lower cost if we're only going by supply and demand, but they also have a higher degree of miner centralization, and lack some of the block relay infrastructure that Bitcoin already has. It's a complex market, it finds it's own price. – Murch – 2017-07-02T20:43:01.017
What is the block relay infrastructure that you're referring to? – student77 – 2017-07-06T06:57:01.837
FIBRE – Murch – 2017-07-06T07:31:57.063