Key Takeaways:
Bitcoin started its first week since the halving at a relatively stable level, trading above $65,800. To the surprise of many, transaction fees on the blockchain nosedived after hitting a historic peak on Saturday, April 20th, 2024.
Miners Collected $78.3 Million in Fees During Halving
Data sourced by Mempool. space, a site that provides real-time information on Bitcoin transactions, showed a massive decrease in transaction fees. On the day of the block reward halving, $78.3 million was collected in transaction fees alone, surpassing Ethereum’s total by more than 24 times.
Medium-priority transactions on the Bitcoin network now cost $8.48, while high-priority transactions are charged $9.32. This is in stark contrast to the $146 charged for a medium-priority transaction and $170 for a high-priority transaction in the aftermath of the halving.
Meanwhile, the hashprice index, an index that measures how much a miner can expect to earn from a specific quantity of hashrate – the unit of computing power necessary to mine BTC, also dropped from $182.98 per hash/day to the level where it was pre-halving, at $81.
Halving is a quadrennial event that occurs on the Bitcoin network when the rewards given to miners in the form of BTC for completing blocks are slashed in half. From this week onwards, the reward for mining new blocks on the blockchain is 3.125 BTC per block, down from 6.25 BTC that was assigned during the last halving in May 2020.
The highly anticipated event was programmed into the blockchain’s code to decrease the rate at which new Bitcoins are created, thereby making the digital asset more scarce and theoretically more valuable over time.
Users Rushed to Get Their Transactions Recorded on Block 840,000, Causing Fees to Skyrocket
Halving occurs once every 210,000 blocks, and this year it happened when the network reached a block height of 840,000. The first block to be mined post-halving collected 37.7 BTC – equivalent to $2.5 million at current prices – in transaction fees, highlighting its status as the most coveted block.
The high transaction costs were attributed to the influx of meme coin and non-fungible token (NFT) users who rushed to get their hands on the Runestone collection to inscribe their transactions on block 840,000.
Runes is a project designed to create fungible tokens on the Bitcoin network that went live during the halving. NFT and token projects on the blockchain are a glimmer of hope for the miners who anticipated halving to claw back on their revenue significantly.
However, following the halving, floor prices for the Runestone NFT collection dropped by almost 50%. Listings on the leading NFT marketplace Magic Eden show a floor price of nearly 0.037 BTC for the digital collectibles.
Meanwhile, Ordinals-based NFT collections like Bitcoin Puppets and NodeMonkes are up 11% and 8%, respectively, in the last 24 hours.
Block number 840,000 comprised 3,500 transactions that collected an average of nearly $800 in fees per transaction, underscoring the high stakes and intense competition among miners and users at this juncture.
However, once Bitcoin moved past block 840,200, the hype cooled down and the fees normalized to between 1 and 2 BTC per block, providing some relief to active users of the network.
Big Miners Prepared for the Halving by Expanding Their Operations and Buying Out Smaller Firms
Realizing that the halving could massively affect their revenue, many publicly listed Bitcoin mining firms were busy stacking up more efficient mining hardware and scaling their electrical capacities to output more hashrate. Their strategy was to iron out the economic impact of the quadrennial event.
In contrast, it was the smaller miners who faced the heat of the situation head-on as they grappled with potential issues related to operational viability. The halving has increased the likelihood of many of them going out of business.
This dynamic could lead to Bitcoin mining operations being much more concentrated as smaller miners either scale up by merging with the more established ones or bow out of the market.
The halving only brought about a modest uptick in Bitcoin prices, with its value increasing slightly by 1.5% to trade between $64,800 and $65,000 on Saturday. Historically, the full economic impact of halving events takes months to materialize fully on Bitcoin’s market value and the mining sector.
At the time of writing, Bitcoin (BTC) is trading at $66,545 – up 1% in the last 24 hours.
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