The halving of Bitcoin [BTC] has been to the cryptocurrency world what the Olympics are to the sports community and the Oscar Awards are to movie buffs. Halving is a much anticipated and joyous occasion that, by limiting supply, tends to increase the economic worth of the largest digital asset on the earth.
Notwithstanding the seeming optimism, these occurrences have negatively impacted the economics of Bitcoin mining, compelling miners to switch to new strategies in order to increase their profit margins.
Miners of Bitcoin suffer from halvings
As is widely known, miners play a crucial role in the daily operations of the chain by validating and adding transactions to the Bitcoin ledger. To accomplish this, miners invest a significant amount of money in building out their mining infrastructure.
They are paid a set amount from each block they mine as well as transaction fees from users in exchange.
Reductions target the essential source of their income: block awards. The rewards for the last such occurrence, which decreased them from 6.25 BTC to 3.125 BTC, have been cut in half in each of the four instances in the brief existence of Bitcoin.
Similarly, after the subsequent halving, incentives would decrease to 1.5625 coins every block, and miners would only be paid transaction fees after all Bitcoins have been mined, which is anticipated to happen in about 2140.
This meant that in order to break even, or to obtain the same production after halving, miners would need to double their mining investments.
The importance of fees for transactions
As previously indicated, with each halving, user-paid transaction fees were starting to emerge as a reliable source of income for miners. This indicated that there was a compelling reason to explore for opportunities to boost Bitcoin network usage and enhance miner fees.
Novel token systems such as Ordinals and Runes emerge.
The Rune protocol has went online with the halving block of 840,000. Runes, created by Casey Rodmarmor, who also unveiled the Ordinals idea the previous year, enables users to manufacture tokens on the Bitcoin network.
The outcomes happened right away. Miners received an incredible 37.62 BTCs in fees during the halving block, which, at current market pricing, is about $2.4 million.
Miners profited from the block in excess of $2.6 million when combined with the reduced 3.12 BTC block subsidy.
The path ahead
There's no denying that protocols like Runes and Ordinals encourage speculative behavior to produce new coins, especially among crypto degens, even though the enthusiasm has calmed since the day of the halving.
This has enabled the first generation network to have a new use case. Until 2023, Bitcoin was only known for being a peer-to-peer (P2P) payments network with limited practical applications.
It has begun to position itself, nevertheless, like other traditional layer-1 blockchains with Ordinals and Runes, allowing for the minting of NFTs and other fungible tokens.
April 2024, Cryptoniteuae