The fees collected in a block of Bitcoin transactions exceed the block reward, a testament to the growing demand for block space as a result of Ordinals and BRC-20. Given that this is the first time this has happened without the price of bitcoin being in a significant bull market, this is a milestone in the evolution of Bitcoin, as it reinforces the growing potential for transaction fees to network operations can be maintained.
Dustin Trammell saidCEO of Trammell Venture Partners, the first time the fees of a block exceeded the block reward was in block 500,521 in 2017.
The increase in transaction fees can be attributed to the introduction of Ordinals and BRC-20. Inscriptions, data sets written using the Ordinals protocol, have already pumped the market with fees and started impacting mempools within the last two months. But BRC-20, a newly introduced token standard that allows tokens to be tied to the Bitcoin blockchain, has created an economic incentive with mining, usually done with the smallest UTXO size possible. , leading to new competition for block space.
This leads users to pay higher and higher fees to ensure that their transactions are processed faster, as miners naturally prioritize bitcoin transactions with higher fees to maximize their income.
On top of that, the recent increase in the price of Bitcoin has also contributed to an increase (albeit slightly) in transaction fees, as users are willing to pay more to move their bitcoin holdings. The combination of these factors has resulted in a significant increase in the income earned by miners from transaction fees, which now exceeds the fixed block reward of some blocks.
The fee increase will have a measurable impact on businesses that use on-chain bitcoin and Lightning. Binance, the world’s largest cryptocurrency exchange, should stop and restart bitcoin withdrawals twice, claiming network congestion is the cause. As a result, the company stated that it is looking Lightning integration to further facilitate small withdrawals during high fee environments. Francis Pouliot, CEO of Bull Bitcoin, a Canadian, bitcoin-only non-custodial exchange, took to Twitter, States “I think it’s important for bitcoiners to know how increasing fees without increasing the number of tx and price pumps will affect a business like ours.”
It’s not just businesses, either – citizens of countries that rely on bitcoin saw the difficultiesbecause fees for on-chain transactions are a significant amount of money for many — and Lightning not always available yet.
The Bitcoin security market has long been a center of debateas, apart from the bull run price, block space has largely remained cheap since the beginning of Bitcoin.
While the fixed block reward is set to decrease over time, the increase in transaction fees can offset this decrease and ensure that miners continue to be motivated to process Bitcoin transactions. But many individuals on Bitcoin Twitter seem to disagree with Ordinals and BRC-20 fulfilling the role of security in the Bitcoin payment market, called flooding transactions is a “DoS attack.”
Anita Posch, a Bitcoiner focused on global adoption, too Challenges to Twitter adoption highlighted, ask, “Can someone explain how I can get people to ride these bills? Can’t use on-chain, can’t open channels. Made custodial Lightning the only option. “
Others are easy to remind their fellow Bitcoiners that this event is not something that can be easily reversed, and it was ultimately inevitable — the fee increase is a great incentive for miners to continue facilitating the transactions that caused it.
“The purpose of BRC-20 so far has been to highlight some points of contention within the Bitcoin community and spark a much-needed debate about immutability, censorship and what Bitcoin is and should be. ” AngelBlock CEO Alex Strzesniewski said about the controversy. “A debate long overdue.”
As the debate continues, the free market and Bitcoin’s built-in incentives will resolve the situation whichever way the network finds most valuable.
