So I was planning on just starting a thread in the chat group but on second thought, I think it’s probably more helpful to just send this out as an actual email/post.
Obviously the Bitcoin halving happened last night. From now until April 2028, each additional block on the Bitcoin blockchain will only release 3.125 new BTC into circulation. As of writing, there have been 77 new blocks. Incredibly, these new blocks have actually had more BTC paid to miners not less:
Here are the pre-halving blocks for context:
Block 840000 was the “halving block” and you can see from the first image in this post that there was nearly 41 BTC paid to miners in that first block of this new reward rate epoch. That’s a $2.6 million block reward paid out to the ViaBTC pool - 92% of which came from transaction fees rather than new coin issuance. Just incredible. Transaction fees have been absolutely exploding:
This is a one-week view of the fee rates. You can see how high these things have gone since block 83999. Right now, the average rate is well over $100. Meaning 31.6 million of the 53.4 million non-zero BTC wallets on-chain - 60.2% of them - are effectively unusable.
Fortunately, these wallet cohorts are holding less a $1 billion worth of BTC supply. But this just goes to show how Bitcoin as a network has become a chain primarily for the early adopter “crypto elite” rather than for most people. Anyway, I’ve already made this point plenty… I digress.
Taking a wider view of this fee rate trend really puts it into perspective though:
Above we can observe the full year trend in Bitcoin’s fee rates. This post-halving spike is beyond anything we’ve seen from Ordinals in the last 12 months. It’s higher than the May 2023 spike and also higher than the spikes from November and December last year. Ultimately, the question is how sustainable can this really be?
And to answer that, we have to understand what is driving all of this action.
Bitcoin Runes
I have not written about Runes on this blog previously. Frankly, because I don’t have much interest. But simply put, Runes is a protocol that simplifies token creation on Bitcoin. “Shitcoins” on Bitcoin, if that helps. Started by Ordinals-creator Casey Rodarmor, the ultimate goal of Runes is to serve as an improvement over the BRC-20 token standard utilized by Ordinals. This is how CoinDesk characterizes Runes and what the protocol could do to Bitcoin:
The Runes protocol, which will allow users to spin up scads of tokens atop Bitcoin like those commonly seen on other blockchains like Ethereum and Solana, could build on the success of Ordinals. But the arrival of Rodarmor's new platform could also fundamentally stretch the boundaries of what has previously been considered acceptable in Bitcoin culture, where any digital tokens besides the native cryptocurrency bitcoin have long been viewed as taboo.
So as far as challenging the culture, I’m clearly for the chaos. It has been somewhat hilarious over the last 12 months watching the Bitcoin Maxi hatred of Ordinals because, and I swear I’m not making this up… “Bitcoin is supposed to be for payments not junk transactions”… even though BTC is also “supposed to be” HODL’d and never sold… but I digress again…
Regardless, Runes is here. And it is already responsible for no less than $20.5 million in fees paid to miners in less than a day. It’s pretty impressive.
What Are The Opportunities Here?
I’m not going to tell you to pay $150 to mint a “Rune.” But if you really want to buy one of these things because you feel it has some value as a historical artifact, knock yourself out. Personally, I think there’s a better way to play all this.
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