Unlike past occurrences, with this halving, Bitcoin’s price has taken a “backseat”. The spotlight has shifted to transaction fees on the Bitcoin network – now soaring due to the launch of the Runes Protocol.
This new protocol has led to a powerful transaction wave as speculators flock to the Bitcoin network to mint fungible tokens. Looking at the bigger picture, Runes, along with earlier protocols like Ordinals and BRC-20, are predicted to unlock unprecedented potential in this trillion-dollar asset class.
The Runes protocol causes a sharp increase in Bitcoin fees.
According to historical data, the price of Bitcoin always increases after each halving event. The underlying logic is that as fewer new Bitcoins are created, existing Bitcoins become more valuable. However, this time, things are different.
In mid-March, Bitcoin reached an all-time high of around $73,800 and fell to around $64,000 before the halving occurred at 00:09 UTC on Saturday, April 20. Immediately after the halving, the price dropped by 0.47% to around $63,700, then rose to about $65,000 on Sunday.
Commentators believe that the halving had already been priced into Bitcoin’s price with the approval of the Bitcoin ETF. Therefore, the impact of this halving event is not as significant as previous ones.
This is unfortunate news for Bitcoin miners because with this halving, their block rewards have decreased by 50% from 6.25 Bitcoin to 3.125 Bitcoin.
However, they didn’t stay sad for long. Casey Rodarmor’s Runes protocol, launched on the Bitcoin network on the same day as the halving, pushed transaction fees to record levels and brought unexpected profits to miners.
The block halving – block 840,000 – came with a record-high fee of 37.6 Bitcoin (worth over $2.4 million). The fees remained significantly higher than usual an hour after the halving.
The lucky mining pool to win this block was ViaBTC. Prior to this, miners had been fiercely competing for this block because it contained “rare sats” following the halving. These are considered valuable collectibles and are estimated to be worth millions of dollars or multiples of the current price of a whole Bitcoin.
In just one day, the total revenue of miners, including block rewards and transaction fees, reached a record high of $107.8 million, according to YCharts.
“We believe the excitement that drove fees this high will cool off soon. However, this incident shows that concerns about the Bitcoin network not generating enough revenue to maintain security have been misplaced,” said Ten31, a company focused on Bitcoin investment.
Regarding Runes, less than an hour after the protocol was launched, 853 runes were etched, according to the runealpha.xyz website.
The competition among users to mint runes was intense. This was reflected in the fees they had to pay to have their transactions included in blocks.
Specifically, the block halving saw a fee of $2.4 million compared to $40,000 – $60,000 for a typical block before the halving. Some subsequent blocks also had fees exceeding $1 million. For instance, block 840,003 recorded a fee of 16.06 Bitcoin, and block 840,004 accumulated 24 Bitcoin in fees, valued at over $1.5 million.
“We’ve never seen anything like this in Bitcoin history,” said Jimmy Song, a renowned Bitcoin developer. “We’re putting pressure on the network in ways that haven’t been done before.”
On-chain data shows that the average sat per byte fee (sats/vByte) skyrocketed to 1,805 sats/vByte after the halving. Prior to the halving, the most recent average fee was nearly 100 sats/vByte.
(Sats/vByte is a measure of the fee used to conduct transactions on the Bitcoin network, indicating how many sats you’re willing to pay per byte of data in your transaction.)
This means transaction fees have surged, with average priority transactions priced at $146 and high priority transactions costing around $170.
The Future of DeFi on the Bitcoin Network
Runes, along with Ordinals and BRC-20, have opened up new promising opportunities for Bitcoin. If the network can support NFTs and tokens, then other applications can also leverage its unparalleled security and network fame.
Previously, many believed that Bitcoin would play a passive role in the blockchain ecosystem, serving mainly as a fundamental asset. However, this perspective is gradually changing – Bitcoin will evolve into BitcoinFi.
According to Brendon Sedo, an early contributor to Core DAO, the future of Bitcoin DeFi involves integrating the network’s security into Ethereum Virtual Machine (EVM)-compatible smart contracts. Scalable EVM-compatible network extension solutions are the most effective way to incentivize miners to ensure security for both smart contracts and Bitcoin.
Additionally, similar to the dual role of ETH in securing Ethereum and serving as currency, Bitcoin has the potential to evolve into a versatile asset, not limited to the Bitcoin blockchain. The launch of Bitcoin staking this year promises to transform Bitcoin from a passive asset into a rewarding asset, marking a significant utility shift.
“As the DeFi ecosystem becomes widely connected with both Bitcoin miners and Bitcoin holders/stakers, those ecosystems will become the largest and safest platforms for ‘BTCFi’,” Brendon Sedo said.
“As advancements like atomic swaps and sophisticated bridge solutions overcome technical barriers, Bitcoin will flow into DeFi protocols. That capital will unlock special utilities for the most reliable blockchain-based asset in the world.”
