Since early 2023, a new form of non-fungible tokens (NFTs), known as Bitcoin Ordinals Inscriptions, has sparked widespread interest in the crypto space.
The popularity of inscriptions can be attributed to their novelty and the unique value proposition they offer. They provide a way for users to immortalize messages on Bitcoin’s immutable blockchain, adding a new layer of functionality to Bitcoin’s utility as a store of value. This has opened up a new avenue for creativity and personal expression within the Bitcoin ecosystem, allowing users to create a lasting legacy on the blockchain.
Furthermore, the arrival of Inscriptions was a major milestone for Bitcoin, marking its entry into the NFT space, a domain previously dominated by Ethereum and other smart contract platforms.
However, the rise in popularity of signups had a significant impact on the Bitcoin network. The increased demand for these new NFTs led to a substantial increase in transaction costs and network congestion, resulting in an unprecedented increase in mining revenue due to increased transaction fees.
However, recent data suggests that enthusiasm around enrollment has cooled. Several mining-related metrics indicate a return to pre-listing levels, signaling market normalization.
Miner revenue per exahash, a measure of the revenue miners earn for each exahash of computing power they contribute to the network, has seen a significant decline since its peak on May 8, 2023. Revenue per exahash denominated in USD decreased by more than 44% since May 8, after an increase of 110% from January to May.
When denominated in BTC, miner revenue experienced a similar trend, declining by 48% since May 8.
Chart showing miner revenue per exahash YTD (Source: Glassnode)
The mode of enrollments had a significant impact on the composition of mining revenues. On May 8, transaction fees accounted for 42.59% of all miner revenue, marking the second highest level on record. The all-time high was recorded on December 22, 2017, during Bitcoin’s rally to $20,000, when transaction fees accounted for 43.57% of total revenue.
To put this in perspective, the percentage of mining revenue from transaction fees on January 1, 2023 was only 0.73%. As of June 16, 2023, transaction fees make up about 1.56% of miners’ revenue, indicating that most revenue is derived from block rewards.
Graph showing percentage of mining revenue from YTD transaction fees (Source: Glassnode)
The normalization of miner income and the decrease in transaction fees suggest that the market has adjusted to the Signup phenomenon. While the signup trend provided some temporary financial relief for Bitcoin miners, it appears that the Bitcoin network is returning to business as usual.
This return to normal is a positive sign for the Bitcoin network, indicating its resilience and ability to adapt to new developments and trends.
This post Bitcoin miners’ income stabilizes as demand for sign-ups declines
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