Bitcoin NFT overturns mining trend ─ transaction fee exceeds mining reward | coindesk JAPAN | Coindesk Japan

For the first time since 2017, some Bitcoin (BTC) miners are earning more from processing transactions on the blockchain than they are from generating new Bitcoins. ing. It could be a welcome development for the mining industry, which has been hit hard this winter.

Bitcoin miners use their vast computing power to make money in two ways: generating new Bitcoins and processing transactions on the network. The former, however, is less profitable due to the design of the Bitcoin blockchain. About once every four years, there is a so-called “half-life” where the reward is cut in half. Currently, the reward is 6.25 BTC, but next year it will be halved again.

In short, miner profitability is at potential risk in the long run. Ultimately, the reward for creating new bitcoins will be very small and will disappear after all bitcoins have been mined (probably over 100 years).

So the recent surge in revenue from transaction processing should be welcomed, especially given the brunt of bankruptcies and other woes that have hit the mining industry during this “crypto winter.” The trend is so strong that on May 8, mining pools such as Luxor Technologies and AntPool repeatedly paid higher transaction fees than the 6.25 BTC mining reward.

Bitcoin NFTs

Ordinals appears to be at least partially responsible for this trend. Ordinals is the project that made so-called “Bitcoin NFTs” possible.

The rise of Bitcoin NFTs over the past few months is “a cool example of when you thought Bitcoin was boring, there was something that surprised everyone,” said Colin, head of content at Luxor Technologies. – said Colin Harper. He believed that transaction fees would not exceed the 6.25 BTC mining reward until it was halved.

Glassnode

According to Harper, many people “couldn’t imagine a future where transaction fees would completely replace mining rewards, and thought it was impossible before this (actually) happened. ”.

He added that “some people questioned whether Bitcoin’s blockspace could have use cases other than payments,” but now, “there are new ways to use blockspace, and how people pay fees for blockspace is going to be a long-term problem.” Overall, it’s good for the Bitcoin blockchain,” he said. The question is whether Bitcoin NFTs and Ordinals will last.

According to BitInfoCharts, the Bitcoin blockchain average transaction fee rose more than 560% in May to a record $19.20.

｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
| Image: Glassnode
｜Original: Ordinals Upend Bitcoin Mining, Pushing Transaction Fees Above Mining Reward for First Time in Years