A report from GlassNode, an analytics platform, shows that revenue drawn from transaction fees for Bitcoin miners is back to normal levels. In the Bitcoin network, miners play a critical role of not only securing the network but by confirmation transactions and batching them out in blocks roughly every 10 minutes.
This rhythmic pulse and confirmation of Bitcoin transactions keeps the network going.
Mining Bitcoin Is Expensive
However, to run a node and to mine Bitcoins is a resource-intensive process.
As such, the Bitcoin network motivates people from diverse backgrounds to funnel their resources for valuable Bitcoins every 10 minutes and a batch of transaction fees. Bitcoin rewards will be diminished over time and the last Bitcoin, as designed by the Satoshi will be mined in 2140.
Then, the network will be heavily reliant on participation and on-chain activity since transaction fees charged will be the primary source of revenue for miners who have to keep tabs with emerging factors as gear efficiency, electricity rates, and others.
Why Transaction Fees Are Dropping?
The drop in average transaction costs could be pinned to on-chain activities like the increasing use of SegWit wallets which are cheaper to transact with (a transaction occupies a smaller space within the block allowing more to fit. Block size is capped at 1 MB) and transaction batching by exchanges.
Several exchanges including Bitstamp batch their BTC transactions, sending them out regularly, say after every 15 minutes, in a bid not to stress the network with “dust” transactions. Consequently, the network is not over-worked and this can keep the network’s on-chain transaction fees low therefore driving miner revenue down.
Transaction Fees Rose after Halving
In preparation, as the network revealed, the network’s average transaction fees shot from around the $0.5 mark registered in mid-April to over $6.6 on May 20.
Post halving, fees spiked at the back of increasing difficulty and miners competing for the lower rewards while operation expenses remain the same.
Average transaction fees have since dropped to around $3.3 as the network re-adjusted difficulty enabling miners to use less energy to mine Bitcoin. Advising this was a clear exodus of some miners who couldn’t break even with their absence being part of the explanation why the hash rate (which is Bitcoin’s computational power) fell in tandem.
It was also noted that miners have been liquidating their holdings and over 950 BTC have since been sold in the last week.