While the reward that miners receive fro unlocking a new block on the Bitcoin network is well known to fund and incentivize the mining ecosystem, there is another avenue of revenue for these miners. Bitcoin transaction fees are also an important part of the system.
It now appears that while the halving ahs cut the rewards of miners and what they earn for unlocking blocks, they have been earning more in fees, but this is at their own hands too. In Bitcoin, transaction fees are paid to miners based on the data size of a transaction, not the amount of Bitcoin involved in the transaction. Users effectively bid on the available block space as new blocks are mined on a regular basis.
The increase in mining fees, which reached $3.14 — the highest reading since February 6, 2018, just following the boom of Bitcoin to $20,000 after the ICO boom — seems to be indicative of the difficulty miners are having unlocking new blocks and having slowed down their operations thanks to the fall out of mining power.
Slower miners
Because the halving impacted a large sector of the mining space there has been a big fall out of hashing power as less than profitable miners have been forced to move to other blocks or shut up shop entirely.
Fees look to be on the up because the supply and demand dynamics of the block space available on the Bitcoin network. Blocks have been found by miners at a much slower pace ever since the halving took place, according to Longhash. Less blocks per day means a lower supply of block space per day. Lower supply and constant or higher demand means higher prices.
More so, Bitrefill CEO Sergej Kotliar said on Twitter that there’s a large entity currently overpaying for the consolidation of their unspent transaction outputs (UTXOs). Consolidating the UTXOs in one’s Bitcoin wallet has the side effect of lowering the fees on future transactions, as fewer outputs means less data needs to be placed on the blockchain.
Better used
On the other side of things, the higher fees for the space on the blockchain is indicative of how much better used the blockchain is today compared with early 2018.
“In terms of payments per day, Bitcoin was sitting at a 7-day average of roughly 707,000 last week. This is an increase of 22% from the roughly 579,000 payments per day that were seen the last time fees were this high,” Longhash explained
“This is a rather dramatic increase in payments per day made available for roughly the same price, especially when you consider the lower supply of block space available since the halving, in which the miner subsidy associated with each new block was cut in half. Additionally, the average fee per Bitcoin payment, which is not the same as a transaction, is currently around $2.13, while it was roughly $2.64 on February 6, 2018.”
Yes, the fees increase was foreseeable due to the halving. Bitcoin it's expensive, no doubt. By the way, congrats on creating a new community at read cash, and hoping you get many readers soon.