Benzinga - Fees charged for processing transactions on the Bitcoin (CRYPTO: BTC) network have been on the rise in the last two years, providing a more sustainable source of income for a sector whose margins are narrowing.
What happened: Transaction fees now account for more than 7% of the miners' total earnings, dramatically up from just 1% two years ago, according to Ki Young Ju, CEO of on-chain analytics firm CryptoQuant.
In fact, on May 5, fees constituted more than 22% of the total mining revenue.
Building apps on #Bitcoin has significantly changed miners' income streams.Transaction fees now account for over 7% of their total revenue, up from 1% two years ago.
This trend has persisted for the last four weeks and could potentially strengthen the network's fundamentals. pic.twitter.com/YVbdmLXB5c
— Ki Young Ju (@ki_young_ju) May 7, 2024
"This trend has persisted for the last four weeks and could potentially strengthen the network’s fundamentals," the CEO added.
The growing transaction fees pie could be attributed to novel token protocols like Ordinals and Runes, which have added more utility to Bitcoin. These technologies have enabled minting of non fungible and fungible tokens on the network, resulting in a higher number of transactions.
Why it matters: This surge is essential because it mitigates the impact of decreasing block rewards due to the halving.
Miner revenue is composed of two components – fixed block subsidy and transaction fees paid by users. Due to the programmatic halving events, block rewards take a hit.
But as transaction fees continue to take up a bigger part of the revenue, they could help offset the thinning profit margins after each successive halving.
The recent halving illustrated this changing paradigm. The day when block rewards were slashed from 6.25 Bitcoins to 3.125 Bitcoins, fees exploded to an all-time high, cornering more than 60% of the total revenue, according to Hashrate Index.
Price action: Bitcoin was trading at $63,264 at the time of publication, following a 1.16% decline in the last 24 hours, according to data from Benzinga Pro.
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