Bitcoin Miners Reap Windfall as ‘Runes’ Debut Sends Transaction Fees to Record Highs

Casey Rodarmor’s recently introduced Runes protocol for creating digital tokens on the oldest and biggest blockchain has seen extraordinary demand, resulting in extensive network congestion and soaring transaction fees that have become a bonanza for Bitcoin miners.

On April 20th, when Bitcoin underwent halving and Runes were introduced, the average transaction fee reached an unprecedented $127.97 in Coordinated Universal Time, marking a significant increase of over seven times compared to the day prior, and nearly doubling the old record from three years ago.

On a single day, the income for Bitcoin miners reached an all-time high of $107.8 million, encompassing both block rewards and transaction fees, as reported by YCharts.

These companies, such as Marathon Digital Holdings ($MARA), Riot Blockchain ($RIOT), Hut 8 Mining (HUT), and Core Scientific (CORZ), could experience significant growth in the Bitcoin mining sector due to recent developments. Notably, Marathon announced its new name, which coincidentally is the same as its stock ticker symbol, on Friday.

Bitcoin’s creator, Satoshi Nakamoto, included the quadrennial halvings in the cryptocurrency’s 2009 launch as a means to strengthen its resistance to inflation. This was achieved by gradually reducing the rate of new bitcoins being released. However, with rewards for miners shrinking, there is debate over whether they will be sufficiently motivated to keep mining on the blockchain. Their work is vital to maintaining the security of the network.

In simpler terms, Ten31 believes that the current feverish increase in bitcoin fees will eventually calm down soon. However, this recent occurrence is just another reminder that fears about the long-term cost of securing bitcoin are unwarranted.

Ordinals sequel

Using Rodarmor’s latest Runes protocol, it is possible to create new digital tokens similar to those prevalent in the Ethereum network, yet scarcely present in the Bitcoin system up until now.

People eagerly awaited the launch since Rodarmor spearheaded the development of Ordinals – an innovative method for creating NFTs on Bitcoin that gained immense popularity following its introduction last year, surprising many.

In a recent episode of his Hell Money podcast, Rodarmor expressed concerns aloud about the potential failure of Runes. If the primary function of Runes is to create “meme coins” for traders with volatile interests, why would these traders be drawn to a blockchain designed prioritizing security over speed or affordability? A simpler way to phrase it could be: On his podcast, Rodarmor questioned if Runes would succeed since its main purpose is creating “trendy coins” for traders with shifting preferences. Why then would these traders prefer a secure blockchain over one that’s faster or cheaper?

They indeed came, and Runes surpassed even the most optimistic predictions.

Based on RuneAlpha’s data from April 21, a total of 4,923 runes have been inscribed, involving 801,124 rune transactions, and there are currently 68,548 individuals holding these runes.

In his Saturday blog post, Jimmy Song, an individual Bitcoin developer and commentator, expressed that the heightened interest in Runes has brought transactions fees down to almost affordable levels for inclusion into the Bitcoin network.

“The Runes asset issuance has overridden almost every other use case at the moment,” Song wrote.

In simpler terms, the Bitcoin Layer Substack stated that Runes seems like a “greater fools’ game where practically everyone is at a loss,” but it does occupy block space and could make the need for faster development and broader implementation of second-layer scaling solutions like the Lightning Network more pressing.

The percentage fee for transactions in each block reached an all-time high of 75% among miners’ overall earnings, as reported by authors Joe Consorti and Nik Bhatia.

‘Preview of what’s to come’

The authors predict that the economic dynamics of Bitcoin mining will significantly change over the next few decades as the value of Bitcoin grows to over $10 trillion. Consequently, demand for the network is anticipated to increase dramatically compared to current levels. Additionally, after a few more halvings have occurred.

If the cost of transactions rises to more than previous levels, then the effect of the halving on miner income will be lessened. (Grayscale’s statement paraphrased)