[Miners need a Bitcoin app to persist]

The security of the Bitcoin network relies on miners adding new blocks, and they earn revenue through transaction fees and block subsidies. However, the block subsidy halves every four years and will eventually approach zero (the most recent halving was on April 19, 2024). This requires an increase in transaction activity to maintain miners’ profits.

Miners can increase market share by upgrading equipment or expanding operations, and miners with higher returns and those who have accumulated large Bitcoin reserves are most likely to make these investments. Miners with high energy costs may shut down operations. Miners will continue to look to work with energy suppliers to balance energy needs, which is particularly important for renewable energy projects.

Earlier this year, the U.S. Securities and Exchange Commission approved a spot Bitcoin ETF, which led to a surge in Bitcoin prices and trading volume, attracting new institutional investors. Chainalysis reports that the number of Lightning Network channels will triple in 2023, indicating the network’s increased utility.

Still, transaction fees account for a relatively low share of miners’ revenue, according to Coin Metrics. Bitcoin has limited scalability and functionality, making it slower to grow in transaction fees. Bitcoin is primarily used for peer-to-peer payments and transactions, and these uses are not sufficient to consistently drive revenue.

The Bitcoin blockchain design will not change, so new features will come from technological developments in the ecosystem. For example, the Runes protocol and Ordinals inscriptions introduced tokenization capabilities, resulting in increased transaction activity. These innovations may help Bitcoin catch up with other blockchains in the tokenization of financial markets. In addition, emerging second-layer chain technology can alleviate Bitcoin’s scalability limitations and support more DeFi and tokenized applications.

Bitcoin’s long-term supporters expect it to become the new global reserve asset and serve as a neutral means of exchange for AI economic agents in future global networks. Currently, higher and stable transaction revenue is crucial to sustaining the network, so technological development progress is crucial.

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