The decline in Bitcoin’s transaction fees of over 80% since April 2024 raises concerns about network sustainability and miners' economic models.
The Fee Market Collapse
Since the halving in April 2024, the reward for mining blocks has been cut in half to 3.125 BTC. According to the Galaxy Digital report, this sharp decline poses a direct threat to the financial viability of mining activities.
Data shows that nearly 15% of blocks are now being mined for minimal or no fees, while network capacity remains largely underutilized.
BTCfi as a Potential Solution
Faced with this crisis, BTCfi, Bitcoin-native decentralized finance, is being considered as a potential solution. BTCfi uses Bitcoin as the underlying asset, leading to an increase in transaction volume and consequently fees.
Pierre Samaties from Dfinity Foundation emphasized that "every BTCfi action requires moving bitcoins," which results in additional costs for block space.
The Security Question for Bitcoin's Network
This situation raises concerns about miners' long-term interest in securing the network. With declining network activity and a shift of users to alternative blockchains like Solana, a significant number of blocks remain unfilled, adding to the growing concerns.
The crisis in Bitcoin’s transaction fee system raises critical questions about the network's future and financial incentives for miners. BTCfi might be a pathway out of this dilemma, but the ability of Bitcoin to adapt to new economic conditions remains in question.
