According to insights from ViaBTC via Cointelegraph, these applications could be pivotal in maintaining miner incentives.
As block rewards diminish over time, their role becomes increasingly crucial. Let’s discover more about this important news for Bitcoin mining.
Key Applications Bolster Miner Incentives as Bitcoin Rewards Decline
Bitcoin’s block subsidy halves approximately every four years, or every 210,000 blocks. This process is designed to gradually reduce the issuance of new bitcoins until the maximum supply of 21 million is reached. This halving significantly impacts miners’ revenues as the reward for mining new blocks decreases.
Historically, miners have depended on transaction fees to supplement their income, particularly as each Bitcoin halving reduces their block rewards. Before the launch of the Ordinals protocol in January 2023, these fees primarily came from standard peer-to-peer transactions.
#Bitcoin Miner Revenues Explode Thanks to Runes: Should You Load Up on Miners?
👇1-12) Bitcoin miner revenues have exploded with the launch of Runes, a new fungible token standard created by creative organelles. Runes allows people to inscribe arbitrary data on Bitcoin-like art.… pic.twitter.com/cj1VUuHUq7
— 10x Research (@10x_Research) April 24, 2024
However, new Bitcoin apps like Ordinals, enabling data inscription on satoshis, are reshaping miner economics. The new Runes token standard further contributes to this change. These applications increase the demand for block space due to their data-intensive nature, consequently driving up transaction fees.
More About Runes/Ordinals’ Effect on Bitcoin Mining
ViaBTC’s experience provides a concrete example of how these developments can benefit miners. On April 20, ViaBTC mined the 840,000th block, also known as the halving block, where the block subsidy was reduced to 3.125 BTC. This block featured a massive 37.6 BTC in transaction fees, totaling 40.7 BTC or about $2.4 million. This record-setting fee resulted from a surge in activity by enthusiasts of memecoins and nonfungible tokens. They were eager to use the Runes token standard to inscribe “rare satoshis” and fungible tokens.
This phenomenon illustrates how developments at the application layer of Bitcoin. Not only enhances the network’s utility but also creates new revenue streams for miners. As ViaBTC noted, such innovations in blockchain technology could significantly mitigate the long-term impact of decreasing block rewards by increasing network activity and, by extension, transaction fees.
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