According to this chart, Bitcoin's transactions' average confirmation times are varying much more widely than they were a year ago. Why would this be? Is it because the daily transaction rate has been increasing?

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Bitcoin has been in the news a lot, recently. There have been talks about a Bitcoin ETF: http://www.cnbc.com/2017/02/24/bitcoin-hits-record-high-above-1200-on-talk-of-etf-approval.html

There haven have been articles (e.g. http://www.pantagraph.com/business/investment/markets-and-stocks/is-bitcoin-finally-a-serious-currency----or/article_2c5e9474-e135-5e85-906b-308149fac218.html) about Bitcoin becoming a means of investment, a lot of them saying that Bitcoin is digital gold (e.g. https://www.cryptocoinsnews.com/german-tv-calls-bitcoin-digital-gold/).

Every time this happens, 2 things happen:

  • The price of Bitcoin goes up.
  • The transaction rate go up.

The transactions rate goes up as people buy Bitcoin and others move their money in Bitcoin to exchanges to sell their funds as Bitcoin's price went up.

Usually, this is canceled out fairly quickly by China banning Bitcoin for about the 10'000th time (and them then soon after declaring that they won't do it). However, this time, it didn't happen, so Bitcoin's price and the transaction rate both went as high as never before.

Bitcoin has a very limiting block size of just 1 MB, meaning that a block can at most take 1 MB of storage space. Because every transaction has a certain size and virtually no transaction is smaller than 226 Byte (because almost all transactions have at least 2 outputs), this limits the number of useful transactions to 7.37 per second, even if they all just have 1 input and 2 outputs (in reality, there are a lot which are bigger, of course).

If the transaction rate exceeds the rate at which the transactions can be added to the blockchain, there is a lot of competition between people who want to get transactions through fast, meaning that transactions fees go up and the transactions which only pay usual fee are unattractive to miners so they won't include them.

It then can take quite a few days for those transactions to go through as the transaction rate goes down and the backlog of transactions which accumulated during the peak slowly is processed.

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