Halving causes transaction fees to soar with new Bitcoin Runes

Bitcoin’s fourth halving, which halved miners’ rewards, triggered a frenzy of activity on the network. Users spent record amounts on transaction fees to secure their place in this historic block, spurred on by the craze for new Bitcoin Runes.

Historic $2.4 million block on the Bitcoin network

Block 840,000, which triggered Bitcoin’s fourth halving this weekend, April 20, 2024, has gone down in history as the most expensive block ever mined. According to data from the Bitcoin block explorer mempool.spaceusers spent a staggering total of 37.7 Bitcoins (BTC) in transaction fees, or around $2.4 million, to obtain their share of the limited space on this block.

This rush is largely attributed to the simultaneous launch of the Runes protocol which allows new tokens to be created on the Bitcoin network more efficiently than BRC-20.

Users were quick to to inscribe rare satoshis and engrave the first runes on the halving block driving up costs to unprecedented levels. Some even paid up to 8 BTC (over $500,000) in fees for a single transaction.

Such was the craze for runes that fees on the five blocks following halving exceeded the block reward, temporarily offsetting the drop in miners’ income due to the halving of rewards. In total, 3.82 million in fees were spent on the five blocks following the Halving.

BTC miners face the challenge of halving 2024

The halving Bitcoin which halves miners’ rewards every 210,000 blocks, is a crucial event for the ecosystem. During this latest halving, the reward per block fell from 6.25 BTC to 3.125 BTC, a reduction of almost $200,000 per block at current prices.

To compensate for this drop in revenue, miners are relying more and more on transaction fees. In the days leading up to halving, Bitcoin transaction fees exceeded those of Ethereum for three consecutive days. Bitcoin miners cashed in up to $9.98 million and $5.91 million on April 15 and 16, and $7.47 million on April 17.

However, the increased reliance on fees poses long-term challenges for miners. While high fees may temporarily offset declining block rewards, they also run the risk of discouraging users and dampening the adoption of Bitcoin as an everyday means of payment.

In the longer term, miners will be counting on the continued rise in the BTC price to keep their business profitable. The arrival of Runes and the continued success of Ordinals could well be key factors in boosting demand and fees on the Bitcoin network. At the same time, fees on Ethereum are very low, so we can guess where the degens have gone!