Recently, the fee market for Bitcoin transactions has undergone significant changes. Following a decrease in on-chain activity, Bitcoin usage faces several challenges that could affect its economic security.
Where Did All the Bitcoin Fees Go?
The scenario where users can send Bitcoin with almost no costs is favorable for senders but threatens miners' financial standing, who rely on fees to supplement block rewards. Since April 2024, median daily fees have fallen over 80%, with nearly 15% of all blocks classified as 'free blocks.'
Factors Behind Weaker Fees
The decline in fees can be attributed to several structural changes. One is the drastic surge and decline of OP_RETURN transactions, which once accounted for up to 60% of daily activity. Additionally, the growth of Bitcoin ETFs, which hold about 1.3 million BTC, is slowing down transaction demand, undermining miners' fee revenue.
Long-Term Risks for Network Security
According to Galaxy Digital, the declining fee market might lead Bitcoin to become a 'settlement layer without sufficient settlement activity.' With programs focused on asset management and shifting activity towards faster alternatives, the long-term security of the network may be at risk.
Despite the current decline in fees allowing users to interact conveniently with the network, the long-term implications for security remain uncertain. It is crucial to consider how changes in demand and transaction structure might impact Bitcoin's sustainability in the future.
