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Transaction Batching : Lower Fees vs. Privacy

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The past few weeks have seen a drop in the bitcoin network fees and the transaction lag times. It has improved significantly since the highs of $30-40 per transaction. Many believe this is because of what is called ‘transaction batching’

Batching reduces network fees?

This drop is attributed to the drop in the number of daily transactions according to some. The use of BTC has dipped. Currently it is over 154,000 transactions per day, however 2 months back it hovered between 250,000-450,000. Another set of users believe it is due to the adoption of Segregated Witness (Segwit), however, Segwit accounts for only 15% of BTC transaction. And the last theory, is the process of transaction batching.

Big Processors already adopting batching

Transaction batching is a method by which multiple transactions of different addresses can be grouped in to one TXID which alleviated more space in processed blocks. Many crypto service providers have started bundling transactions together in this fashion. Initially, each transaction would have its unique TXID and its own use fee. Shapeshift revealed last week that it has been batching transactions to save space on the blockchain and also save on network fees.

Privacy Concerns

While the benefits of batching are quite apparent to some users, many believe the drawbacks overweigh the benefits. Most stark is the move to centralisation and lack of privacy in the same. This would be a move against the very core of blockchain and digital currencies. While it doesn’t reveal the direct identity, the use of batching can enable blockchain surveillance companies to identify transactions with connected change outputs and other bonded spending habits.

Whether batching is a total disaster for privacy or not is an ongoing debate among enthusiasts, notably on r/bitcoin. However, there is a general lack of consensus on the same.

“So I hear people complaining that Coinbase does not batch transactions. But do we really want this? Anyone could easily make a lot of small transactions scattered and link anything in the batches with Coinbase,” commented a user on r/bitcoin thread.

In 2017, a bitcoin developer discussed batching on his blog saying it would help trimming fees to as much as 80%, but, he too, cited privacy as a concern.

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