For the first time since 2017, some bitcoin (BTC) miners are receiving higher payment for processing transactions on the blockchain than for creating new BTC, a possible positive development after the difficulties the industry has recently endured.
Bitcoin miners are able to generate an income in two distinct ways: creating new BTC through computationally intensive calculations, and verifying Bitcoin transactions on the blockchain. As the Bitcoin network matures, the reward for generating new BTC is decreased every so often; currently, the reward stands at 6.25 BTC, and will be cut in half once more in the near future.
This poses a potential, long-term risk to the profitability of mining as the mining reward diminishes and eventually disappears (which is estimated to occur in more than 100 years after all BTC have been mined).
The recent surge in profits from processing transactions could be a welcome change, especially as the mining industry has been severely affected by the crypto winter, leading to multiple bankruptcies. Monday saw multiple mining pools, such as Luxor Technologies and AntPool, receiving transaction fees higher than the 6.25 BTC mining reward from newly added blocks.
The utilization of ordinals appears to account for some of the change. This fresh endeavor inscribes non-interchangeable tokens (NFTs) onto the blockchain of Bitcoin.
Colin Harper, head of content for mining pool Luxor Technologies, was surprised to see transaction fees surpass the block reward in the past few months. He did not anticipate this happening until the 6.25 BTC subsidy gets halved. He commented, “It’s a cool example of how, just when you think Bitcoin has become boring, there’s something waiting around the corner that surprises everyone.”
According to Harper, many people are wondering if it’s possible to replace subsidies with transaction fees, when this was previously thought to be impossible.
Harper added: “Some doubted whether or not Bitcoin blockspace can have use cases outside of settling value,” but now “there are new uses for blockspace and any use of blockspace where people are paying fees is good for Bitcoin in the long-term.” Harper is wondering if inscriptions and Ordinals will remain relevant.