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At the same time as Bitcoin’s halving, transaction fees on the crypto network have skyrocketed, reaching new all-time highs to the delight of mining operators.

Already today, however, we observe a significant decrease of 75% in fees for individual operations

What is this unusual situation due to? Let’s see everything in detail below.

Transaction fees for Bitcoin network miners return to pre-halving levels

On the day of Bitcoin’s halving, crypto mining operators’ revenues have exploded reaching a new all-time high of $106.7 million, with over 75% coming from transaction fees and only 25% from block rewards.

As reported in the Glassnode data, the fees of the network have exceeded even the previous peaks of enthusiasm recorded during the 2020 and 2016 halving, as well as the bubble of the Ordinals in May 2023.

On April 19, just as the usual quadrennial halving event was going live, crypto users around the world paid a total of 80 million dollars to miners to be able to use the cryptographic network of Bitcoin.

Source: https://studio.glassnode.com/metrics?a=BTC&category=Fees&m=mining.RevenueFromFees

Just 10 days later, transaction fees returned to pre-halving levels, marking a 75% drop and bringing mining revenues back to normal.

If we consider the total revenues of miners, we can see how they have decreased by 45% compared to the pre-halving phase: at the moment they earn about 3-4 bitcoins for each block extracted (block reward + tx fees).

It will be very interesting to see how the situation will evolve after the next difficulty adjustments, with the first expected appointment on May 8th that will probably bring about a reduction of about 3%. At this stage, it is still too early to make a true estimate of the total earnings of miners.

What we can say for sure is that at the time of writing the article, the fees coming exclusively from transactions, which amount to around $50 million, represent just 35% of the total revenue of miners: the hype phase has officially deflated.

Total revenue miner. Source: https://twitter.com/BTCMiningGroup/status/1784717401528910083

To better understand the practical implications of this sudden increase in fees and its subsequent impact, we present this chart from “Ycharts” showing the average transaction cost for the end user of the Bitcoin network.

During the peak of the halving, the average fees to transact on the network were 127 dollars, while now the “tip” to mining operators has even dropped to 6.9 dollars.

Source: https://ycharts.com/indicators/bitcoin_average_transaction_fee

Crypto mining: The reasons behind this “pump and dump” in Bitcoin transaction fees

The main reason for the recent increase in Bitcoin mining fees is to be found in the innovative Runes protocol that was introduced on the day of the halving at the height of block 840,000.

This project, eagerly awaited by much of the crypto community, has introduced the possibility of issuing fungible tokens through an easy and scalable process that focuses on storing metadata in OP RETURN codes (simplifying the data written to the rest that is sent back to the sender during a satoshi transfer).

According to “Crypto Koryo“, over 70% of the fees recorded on the day of the halving were generated by operations related to the Runes protocol.

The number of “inscriptions” has reached 512,000 units.

Parallel to the emergence of Runes, the recent increase in the cost of using the Bitcoin network is also due to users’ desire to be included in the prestigious halving block.

Think that there is a user who, to move just 70 cents, paid $500,000 in fees just to “skip the line” and receive preferential treatment in the validation of operations by miners.

In the midst of this race to include block 840,000, we can partly justify this madness because the first extracted sat immediately after the halving was valued at about 2 million dollars in the secondary market.

Known as “Epic Sat“, this small part of the first BTC extracted on April 19th has prompted several users to go in search of it, given the potentially high reward.

Recently this resource was sold to Coinex for 33.3 BTC.

The reason for the subsequent drop in the post-halving phase, on the other hand, essentially refers to the decline in hype for the launch of a highly anticipated protocol.

Much of the crypto community, including mining operators and shitcoiners, eagerly awaited the halving day and the launch of the Runes: in that context, there was a wild speculation on the buying and selling of the first non-fungible tokens created through this protocol.

Did you know that there was also an airdrop for all holders of Runestone, an NFT based on the world of Ordinals.

After just a few days, the enthusiasm has dropped to levels outside the “degen” zone, bringing the bitcoin network fees back to normal.