Bitcoin Halving Effect: Miner Revenue Tanks 60% But Fees Compensating with 168% Spike
Bitcoin halving is past us and during this time there have been some changes in the network.
As expected, the hash rate of the network crashed 40% from the all-time high put on the halving day as smaller and less profitable miners turned off their machines after being unprofitable.
A decline in hash rate means reduced network security as well. But the long term trend is intact and we have started seeing recovery with the hash rate currently at 99.6 Eh/s.
Actually, bitcoin is still three times more secure than the Ethereum network, its closest runner up. Also, this falling hash rate is expected to be temporary.
Miner revenue takes a hit
In line with the 50% reduction in the bitcoin block reward, total miner revenue has also fallen.
According to the data provided by Blockchain, miners’ revenue crashed nearly 60% to just $7.63 million on the halving day, from two days back.
The violent sell-off in March caused the miner revenue to tank at $6.9 million which peaked on May 6th to $20.6 million only to be hit by halving.
As such, now the percentage of revenue from fees has hit a high of 17.25% that is not seen since January 2018, as per Medio Demarco, co-Founder of Delphi Digital.
With block rewards set to halve every four years or 210,000 blocks, “PoW chains will be increasingly at the mercy of transaction fee revenue as the dominant source of funds for the SB (Security Budget).”
The recent reduction in miner reward pushed the BTC fees to revenue percentage higher, which instead of more transactions has been the result of a jump in the average cost of a transaction fee.
The average bitcoin transaction fee has climbed to $5.16, a spike of 1223% in the past month, which was last seen in June 2019, as per Bitinfocharts.
Mining bitcoin getting difficult
Meanwhile, the current average block time is 80% above the target level. This combination of high fees, reduction in mining power has led to longer wait times in between blocks, as such causing mempool to be more backed up.
As the waiting for the transactions to be confirmed by miners continues to add up, people pay higher fees to get their transaction confirmed faster.
But difficulty adjustment is there to make it all balance which takes place about every two weeks.
Early in the next week, the estimated negative difficulty adjustment of just under 1% will make it easier to mine bitcoin and bring back its current average time of 18 minutes to back at the target 10 minutes.
This would also result in more mining power coming back online.