By Jack Inabinet
Translated by: Kate, Mars Finance
Bitcoin may not be able to continue business as usual.
Bitcoin’s fourth halving, the event programmed to slash the network’s inflationary BTC block rewards by 50% to 3.125 BTC per block.
While there were concerns that the halving would lead to a drop in hash rate, and thus a lower level of economic security, the runes and their far-reaching effects appear to have allayed such concerns.
Bitcoin miners earn income from two components of block rewards: inflationary bitcoin emissions and transaction fees. The emissions portion of their income was cut in half last Friday, but net transaction fees soared as on-chain participants began minting and trading the latest generation of fungible tokens on top of bitcoin.
On April 20, transaction fees accounted for 74% of the total block reward, and despite the sudden drop in inflation, miners can still earn more BTC than before the halving.
Source: Bitbo
While the rise in transaction fees may be sustainable in the long term, with some declaring it marks the beginning of a new era for Bitcoin, there are good reasons to be skeptical of these claims.
Average transaction fees on the Bitcoin network spiked to $127 immediately after Runes was released, but have since plummeted to $27 and continue to fall rapidly to normal levels.
While Runes generated over 1,000 BTC in fees in the first 24 hours after launch, trading activity over the next two days generated a relatively meager 328 BTC, suggesting that hype has begun to wane and that Runes may not be an immediate solution to miners’ revenue problems.
Source: Dune Analytics
Rune enthusiasts hoped that the upcoming wave of listings on centralized exchanges would reignite their excitement, but it is undeniable that the momentum was fading after a while.
Even as the Runecoin resurgence increases Bitcoin trading activity, it’s important to remember the fundamentals (or lack thereof) behind these tokens. Meme coins performed well in the first quarter of 2024, but history has shown time and again that all purely speculative cryptocurrency crazes fade, and the fate of Runecoin speculation will be no different.
Discerning Bitcoin users have long held their proof-of-work consensus mechanism and 21 million issuance hard cap in high regard as two aspects that give BTC value, but in the absence of Runes being able to facilitate sustainable transaction revenue, network participants may be forced to re-evaluate the sustainability of these features.
https://x.com/sassal0x/status/1729659628152078686
The Bitcoin network’s hash rate has remained relatively stable post-halving, falling by less than 4% since the event, and as long as the market remains driven by risk sentiment, rising Bitcoin prices and strong on-chain speculation will support miners’ revenues.
Unless there is clear consensus that Bitcoin’s current emission schedule is insufficient, there is little incentive to implement changes that could undermine BTC’s core value or its established monetary premium.
While the bitcoin community has historically been staunchly opposed to change, neglecting to address future concerns could put the blockchain in an awkward position if worries about network security materialize.
Mathematically speaking, Bitcoin cannot afford its current level of security without the factor driving transaction fees.
Any future reduction in speculative activity would not only decimate Bitcoin’s on-chain activity, it could also have an impact on Bitcoin’s price, further reducing the dollar value of the on-chain security budget and prompting the community to make the major changes it has been resisting during this chaotic moment.
The early attention for Runes raises hopes, but unless the network can undergo a lasting shift that drives up transaction fees, the network will need to seriously consider the possibility that changes will need to be made to ensure future security.
Bitcoin has reigned as the king of cryptocurrencies for more than 15 years, but that dominance isn’t hard-coded.
