Bitcoin miners have experienced a significant increase in funds from transaction fees in the past quarter, generating a multimillion-dollar windfall driven by the popularity of BRC-20 tokens and the introduction of Ordinals, according to Coin Metrics.
BRC-20 tokens boost Bitcoin miner’s revenue
In its latest “State of the Network” report, the crypto analytics firm revealed that Bitcoin miners earned $184 million in transaction fees from April to June, marking a notable shift in the previously tepid fee market. While this figure may appear small compared to the overall $2.4 billion in Bitcoin mining revenue during that period, it represents a substantial increase as it surpasses the combined transaction fee totals of the preceding five quarters.
Coin Metrics described this surge in transaction fees as an exceptional change, largely influenced by the emergence of BRC-20 tokens. Launched earlier this year, Ordinals is a protocol that allows individuals to create NFT-like assets on the Bitcoin network by embedding data into individual satoshis, the smallest units of Bitcoin. Despite some resistance within the Bitcoin community, Ordinals has garnered attention from notable figures such as MicroStrategy co-founder and Executive Chairman Michael Saylor. He has highlighted the protocol’s potential to help miners maintain profitability over time.
BRC-20 tokens, inspired by Ethereum’s ERC-20 token standard, were introduced in March. This experimental class of coins has experienced substantial growth, with a market capitalization of over $240 million since its inception, according to CoinGecko. To mint BRC-20 tokens and claim them from a BRC-20 project, users must submit a transaction along with a fee to ensure the processing of their minting transaction on the Bitcoin network and inclusion in the next block.
Miners experience increased demand for BR -20 tokens
During the peak of BRC-20 token fervor in May, a sense of “mania” emerged, leading people to be more willing to pay higher transaction fees for faster processing. According to Nick Hansen, CEO and co-founder of Luxor Technologies, the urgency created by BRC-20 tokens was driven by the need to confirm transactions faster than other Bitcoin miners to secure the minted coins. In May, transaction fees on the Bitcoin network reached such high levels that some individuals claimed Bitcoin was under attack. Notably, the amount earned by Bitcoin miners from transaction fees surpassed Bitcoin’s block subsidy for the first time since 2017.
Although the frenzy surrounding BRC-20 tokens has subsided, Coin Metrics’ report highlights that miners continue to receive significant funds from transaction fees. Hansen noted that compared to previous years, miners are still earning 10 to 15 times more from their transaction fee volume, indicating persistent demand for Bitcoin block space.
While payout amounts related to transaction fees have slightly decreased with the normalization of the BRC-20 token ecosystem, miners continue to benefit from robust transaction fee earnings. This ongoing trend underscores the evolving dynamics of Bitcoin mining and the sustained demand for block space. As the cryptocurrency landscape continues to evolve, transaction fees and their impact on Bitcoin miners’ revenue remain crucial considerations. The emergence of innovative protocols and the introduction of token standards can introduce new dynamics, reshaping the economics of the network and providing opportunities for miners to adapt and thrive in the evolving digital economy.
