Block number 788695 marks the first time since 2017 that a single block’s transaction fees have exceeded the block rewards given to miners, as a result of Bitcoin’s recent rise in transaction costs. This is a significant milestone for miners. The block’s transaction fees came to 6.7 Bitcoin in total, above the block subsidy of 6.25 Bitcoin.
Users have been caught off guard by this increase in costs, but Bitcoin miners, the global network of volunteers who operate pricy, specialized machines to safeguard the Bitcoin network, have benefited. They are the ones collecting the fees from this recently discovered gold mine.
Bitcoin miners already have two ways to make money. The first is the block subsidy, which gives miners 6.25 Bitcoin every 10 minutes or so. The “halvening” of Bitcoin occurs every four years, splitting this value in half. Transaction fees make up the second source of income. Users have the option to charge for each Bitcoin transaction. Users that want their transactions to be processed quickly must increase their fee if there is greater demand for Bitcoin. As a result, the source of income from transaction fees varies somewhat unpredictably with demand.
The fact that transaction fees will eventually be the only source of income for miners is one reason why this fee excess is so significant for Bitcoin. However, because transaction fees vary so frequently, it hasn’t yet been demonstrated that they will be a reliable source of income when that time comes.
Bitcoin is held together by miners like a puzzle piece. Bitcoin is more secure the more hashing power miners provide to its security. However, if miners aren’t compensated for doing so, they’re not inclined to protect the network. Therefore, if transaction costs don’t rise over time, it could be harmful for Bitcoin.
Block 788695 is a small, optimistic sign that fees could increase, even if it hasn’t proven to be a consistent form of income for miners just yet. As self-custody platform Casa CTO Jameson Lopp put it on Twitter: “The model for thermodynamic security has been proven possible. The only remaining question is if this demand is sustainable.”
Despite the uncertainty surrounding the future of Bitcoin transaction fees, miners are continuing to mine the cryptocurrency at a rapid pace. The value of Bitcoin has continued to rise, which has caused more people to become interested in buying and selling the cryptocurrency. As a result, transaction fees have increased, and miners have been able to reap the benefits.
The growth of alternate cryptocurrencies is one factor that might affect the viability of transaction fees as a source of revenue for miners. Even while Bitcoin is still the most widely used cryptocurrency, there are several others that are gaining popularity. The demand for Bitcoin transactions may decline if customers begin to switch from Bitcoin to other cryptocurrencies, and miners may find it more difficult to make a livelihood.
Although the recent increase in transaction fees is undoubtedly a good thing for Bitcoin miners, it’s not obvious whether this will continue to be a reliable source of income for them in the future. It will be interesting to watch how transaction costs and other facets of Bitcoin change as it continues to develop.