As an experienced financial analyst, I believe the surge in transaction fees from Bitcoin Runes is a game-changer for Bitcoin miners, offering them a substantial revenue boost at a time when block rewards have been halved. This trend was highlighted by Nazar Khan, the co-founder and CEO of TeraWulf, who shared his insights with CryptoMoon.
The increase in Bitcoin Runes’ transaction fees, which is a new method for creating interchangeable tokens on the Bitcoin system, is generating a substantial income enhancement for Bitcoin miners as stated by Nazar Khan, the co-founder and CEO of TeraWulf.
Khan told CryptoMoon in an exclusive:
“Runes significantly increased the transaction fees, so if anything, there was an increase in the hash price in the first 24-30 hours [after halving]. Since then, we’ve seen transaction fees come down, but compared to the average fees in 2023, they’re still pretty high.”
In simpler terms, the Bitcoin block rewards are constant, but transaction fees serve as the unpredictable factor for Bitcoin miners, according to Khan’s explanation.
After the Bitcoin halving cut miner rewards from 6.25 BTC per block to 3.125 BTC, transaction fees have seen a substantial increase, providing miners with essential financial support.
I’ve noticed that the total Bitcoin transaction fees amounted to approximately 105 Bitcoins on April 25. This figure represented a significant decrease from its peak of 1,257 Bitcoins on April 20 – the day of the Bitcoin halving. Despite this decline, transaction fees remained notably elevated compared to most of the year 2023, based on Cryptoquant data.
According to Khan’s analysis, the average transaction fees comprised around 30% of Bitcoin’s block rewards post-halving. This equates to nearly an extra Bitcoin for miners, in addition to their regular reward.
“If you think about the 30% [average transaction fee] where it’s been the last few days, that’s almost one BTC, on top of the 3.125 BTC that are being issued as block rewards. So it is very significant…”
In the year 2023, the typical Bitcoin block reward was split between transaction fees and new bitcoins created, with an average of 10% going towards transaction fees. Terawulf calculated this average transaction fee when estimating the production cost of a single Bitcoin, which they assumed to be $37,000, taking into account a 10% share from transaction fees.
According to Khan, TeraWulf’s Bitcoin production costs are expected to decrease despite higher average transaction fees due to the resulting lower overall costs.
“To the extent that transaction fees are higher than that, we will recognize a lower production cost. So even with 10% transaction fees, we will be very profitable, even post-halving.”
As a researcher studying the Bitcoin mining industry, I’ve come across TerraWulf, which currently ranks as the eighth-largest player in this sector based on its over $750 million market capitalization, according to Companies Market Cap. Despite the recent halving of block rewards, TerraWulf is moving forward with expansion plans.
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2024-04-26 12:55