For the fifth time in history, bitcoin miners’ daily revenue from fees per block exceeded the rewards from its mining (6.25 BTC). Glassnode analysts explained the situation by the increased release of BRC-20 tokens.
#Bitcoin experienced an unexpected demand for blockspace last week, as speculators rushed to mint BRC-20 tokens.
This resulted in immense fee pressure, miner fee revenue near ATHs, and fees surpassing the $BTC block subsidy for the fifth time ever.https://t.co/wrfu9jGazG
— glassnode (@glassnode) May 15, 2023
Within a month, miners earned $100 million in fees and $773 million in block creation. The share of the first indicator of total revenues reached 11.5%, which coincides with the increased levels observed during the periods of bull markets in 2017 and in 2021.
Miner revenues per hashrate (hashprice) briefly jumped to $172,200/EH before falling 55% to $76,300/EH amid easing pressure from fees.
“The surge in demand for the blockchain space has provided positive growth in miner revenues, but so far it is short-lived and pales in comparison to the downtrend (on a logarithmic scale) of hashprice,” experts stressed.
Of the 3275 BTC paid out to miners in the last two weeks, their total balance only increased by 655 BTC (~20% of fees paid). In the chart below, you can see that they still spend about 100% of their income (highlighted in blue).
“Most of the revenue was distributed by the miners, which likely provided relief after a tough 2022 bear market.” experts pointed out.
The BRC-20s are based on the Ordinals project mechanism. They are deployed by adding JSON text files to the blockchain.
Given the small amount of data for these “inscriptions” and the large fees that BRC-20 users were willing to pay, miners were able to fill blocks with a record number of transactions.
Last week, the daily rate jumped to ATH in the amount of ~682,000, exceeding the peak of 2017 (490,000) by 39%. The average number of transactions per block reached 4372 against the standard 1600-2500.
Due to the small size of the BRC-20 signatures and the ability to use the 75% discount applied to SegWit data for them, the average transaction size has been reduced to 405 bytes, which is close to an all-time low. The situation contrasts with the Ordinals boom, during which the metric was ~1.5 kilobytes.
Text “labels” have supplanted other formats like pictures and audio. On some days, users generated over 350,000 such objects.
As a result, text “inscriptions” accounted for more than half of all bitcoin transactions. For comparison, during the first wave of the Ordinals boom, the figure varied between 5-20%.
Text labels were the most popular format (total 5.69 million), outperforming the rest at 89% of the total.
The overloaded mempool contributed to the fifth time in history that revenue from fees exceeded rewards from block creation. The last time this happened was at the peak of the bull market in 2017. The duration of such a phenomenon was always limited to a few days.
At the peak of the hype around BRC-20, the average commission per block reached 6.66 BTC, the total income of miners was 12.9 BTC (~$348,000), experts calculated.
In total, due to the “inscriptions”, the miners received income from commissions in the amount of 1262 BTC. 1090 BTC (86%) of them were paid out in the last week, experts estimated.
In value terms, daily fees reached $17.8 million. As a result, the median and average cost of a standard transfer increased to $20.17 and $30.8, respectively.
“Will they keep „inscriptions” and BRC-20 tokens their strength in the long run remains to be seen. Debates arose about their technical, practical, and philosophical merits. At the moment, it became clear that these technologies led to the emergence of a new buyer of block space”, experts concluded.
Previously, the capitalization of BRC-20 tokens reached $650 million.
Recall that Bitcoin Core developer Luke Dash Jr. proposed to “ban” BRC-20 and Ordinals tokens.
In May 2023, the team associated with the OmniBOLT project announced that they were working on integrating BRC-20 tokens into the Lightning Network “for faster and more efficient transactions.”
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