Bitcoin miners are awash with funds from transaction fees, a multimillion-dollar windfall generated this past quarter due to the popularity of BRC-20 tokens and Ordinals, according to Coin Metrics.
The crypto analytics firm said that a formerly “tepid fee market” for Bitcoin miners has been suddenly upended, with its latest “State of the Network” report finding miners earning $184 million from transaction fees from April through June.
Compared to $2.4 billion in Bitcoin mining revenue overall, that figure may sound small, but the latest transaction fee total represents more than the five preceding quarters combined, Coin Metrics said. It described the shift as “an exceptional change” influenced by BRC-20 tokens.
Launched earlier this year, Ordinals is a protocol that enables people to create NFT-like assets on Bitcoin by inscribing data to an individual satoshi—the smallest unit of currency that a Bitcoin can be divided into, equal to 1/100,000,000 of a whole Bitcoin.
Even though Ordinals’ arrival has been met with some pushback from within the Bitcoin community, its potential has been highlighted by figures like MicroStrategy co-founder and Executive Chairman Michael Saylor, a prominent Bitcoin supporter who noted the protocol’s new ability to help miners stay profitable over time.
BRC-20 tokens were introduced in March, and the experimental class of coins takes inspiration from Ethereum’s ERC-20 token standard. BRC-20 tokens have ballooned to over $240 million in market capitalization since being introduced, according to CoinGecko.
In order for people to mint BRC-20 tokens—and essentially claim them from a BRC-20 project that’s launched—users have to submit a transaction along with a fee to have their move to mint tokens processed on Bitcoin’s network and included in the next block of transactions.
As a sense of “mania” surrounding BRC-20 tokens took hold in May, people became more willing to pay a greater premium on transactions in exchange for speed, Nick Hansen, CEO and co-founder of Luxor Technologies, told Decrypt.
“BRC-20s introduced this urgency because what you needed to do was get your transactions confirmed faster than other peoples’ transactions,” he said. “Then you would basically win the coins from the mint.”
Transaction fees on Bitcoin were so high in May that some people claimed Bitcoin was under attack. And the amount of Bitcoin miners earned from transaction fees outpaced Bitcoin’s block subsidy for the first time since 2017.
Coin Metrics’ report notes that payout amounts related to transaction fees have waned as the fervor surrounding BRC-20s ebbs. Still, the amount of funds that miners are receiving from transaction fees remains robust, Hansen said—especially compared to years past.
“We have calmed down, but we’re still seeing persistent demand for Bitcoin block space,” Hansen said. “Miners are still making 10 to 15 times more from their transaction fee volume than they would have last year.”
