Original title: Bitcoin's Halving Aftermath

Original article by: Parker Merritt & Tanay Ved

Original source: coinmetrix

Compiled by: Lynn, Mars Finance

Bitcoin’s 2024 halving is the most significant in its history, launching a new token protocol and stress-testing the balance sheets of a multi-billion dollar industry.

Key Takeaways:

Between record-breaking transaction fees and massive bids for collectible 'Epic Sat,' Bitcoin halving block miners earn $4.7 million

- Runes protocol launch at block 840,000 triggered a surge in OP_RETURN transactions, with 518K OP_RETURN on 4/20 and an all-time high of 799K on 4/23

- Adjusting miner revenue for electricity consumption, miner revenue per megawatt is now $13,000, close to the lowest level since the FTX crash in 2022

introduce

Following its predetermined monetary policy, Bitcoin underwent its fourth halving at block 840,000, slashing the block reward from 6.25 BTC to 3.125 BTC. Understanding what happens after the halving is critical due to its far-reaching impact on miner economics, mining pools, and the entire Bitcoin ecosystem. This week’s State of the Network examines the consequences of Bitcoin’s recent block reward halving, building on our previous analysis in SOTN Issue 255.

Halving shock

The Bitcoin "halving" is the most carefully planned event in the cryptocurrency industry, with a hard-coded emission schedule setting Bitcoin's issuance rate in stone since the Bitcoin network's inception. However, many questions remain unanswered before the Bitcoin halving - can the mining industry withstand the change? Can transaction fees offset the reduction in mining revenue? What are the implications for the broader Bitcoin community?

While the block subsidy was expected to be cut by 50% at block 840,000, a subsequent wave of fees temporarily eased concerns about mining revenue. Mining pool ViaBTC received the largest bonus, earning 37.63 BTC in transaction fees due to a sudden influx of bids to secure allocation of the earliest block of the era.

Source: Coin Metrics ATLAS & Transaction Tracker

Between the block subsidy of 3.125 BTC and the fees of 37.63 BTC, ViaBTC already earns quite a bit from mining halving blocks — however, this block is particularly lucrative thanks to “Epic Sat.” In addition to supporting NFT-style collectibles, the Ordinals protocol also gives a (somewhat arbitrary) rarity rating to individual satoshis (the smallest subunit of Bitcoin, 0.00000001 BTC). While the market value of a single SAT is a fraction of a penny, “Epic Sat” is designated as the first SAT in the halving block, giving it enormous (subjective) value, as only four have been mined in Bitcoin’s history to date.

As the lucky pool that caught the halving block, ViaBTC isolated the newly minted Epic Sat and auctioned it on CoinEx, an exchange run by ViaBTC’s CEO. After a 3-day bidding war, the collectible sold for 33.3 BTC (about $2.1 million), making block 840,000 the most valuable batch in Bitcoin history.

Source: Coin Metrics ATLAS

Between the block subsidy of 3.125 BTC and the fees of 37.63 BTC, ViaBTC already earns quite a bit from mining halving blocks — however, this block is particularly lucrative thanks to “Epic Sat.” In addition to supporting NFT-style collectibles, the Ordinals protocol also gives a (somewhat arbitrary) rarity rating to individual satoshis (the smallest subunit of Bitcoin, 0.00000001 BTC). While the market value of a single SAT is a fraction of a penny, “Epic Sat” is designated as the first SAT in the halving block, giving it enormous (subjective) value, as only four have been mined in Bitcoin’s history to date.

As the lucky pool that caught the halving block, ViaBTC isolated the newly minted Epic Sat and auctioned it on CoinEx, an exchange run by ViaBTC’s CEO. After a 3-day bidding war, the collectible sold for 33.3 BTC (about $2.1 million), making block 840,000 the most valuable batch in Bitcoin history.

Source: Coin Metrics ATLAS

Epic Sat made a significant contribution to ViaBTC’s earnings, but the series of blocks that followed continued to climb in terms of record-breaking miner revenue. Aside from a massive “fat finger” fee erroneously paid by Paxos in block 818,087 — which was later refunded by AntPool — the top 20 blocks by total revenue (and 88 of the top 100 blocks) were all mined on the first day of Bitcoin’s fifth epoch.

The Rune Saga 

Since their launch in 2023, Ordinals and Incredibles have been the main drivers of transaction fee revenue for miners. However, on the halving block, a new meta-protocol joined the fray. The Rune Token Standard (another invention of Ordinals creator Casey Rodmore) was officially launched on block 840,000, bringing a new wave of on-chain speculation to Bitcoin.

From a technical perspective, Runes sought to improve upon earlier efforts to pin ERC-20-style fungible tokens onto the Bitcoin blockchain. While the Incubator was originally designed to support on-chain NFTs, tinkerers soon repurposed the technology to create “BRC-20,” embedding JSON-formatted text into transactions as a primitive mechanism for creating and transferring tokens. BRC-20s like ORDI soon ballooned to a $1 billion market cap and were listed on exchanges like Binance and OKX.

While popular among speculators, BRC-20 was widely derided as technically inelegant, bloating the blockchain and requiring complex indexing solutions. To bridge these gaps, Runes bypasses Incident entirely, leveraging Bitcoin’s long-standing OP_RETURN field to encode compact token protocol messages. Within 24 hours of Runes’ release on March 20, Bitcoin set a new daily record of 518.6K OP_RETURN outputs, later surpassing 798.7K OP_RETURN on March 23.

Source: TxStats 

Excitement for Runecoin was red-hot following the halving, with 97% of fees in block 840,000 going toward securing a spot as one of the first etched. In the world of on-chain collectibles, there’s an aura of prestige associated with being one of the first projects to launch. The Rune 840,000:1 etcher (aka Z·Z·Z·Z·Z·Z·Z·FEHU·Z·Z·Z·Z) offered miners 6.73 BTC for the first slot in the halving block. The bet appears to have paid off, as “FEHU” is now the highest-valued Runecoin by market cap, with a valuation of $2.4 billion. The size of Runecoin revenue has shrunk, but it’s still a significant contributor to miner revenue, accounting for around 50% of every block’s fees over the past week.

Source: Coin Metrics ATLAS

Since the protocol launched on the halving block, miners have earned a total of 2,000 BTC through Rune fees. Nearly half of this was achieved in the first 24 hours of Rune’s debut, with momentum leveling off less than 5 days later. However, Rune is still in its infancy, and miners are benefiting from a small increase in revenue as highly anticipated projects enter the market. At block 842,166, the winner of the ViaBTC auction linked Epic Sat to a new rune called EPIC EPIC EPIC, spurring a 4-hour fee spike as speculators minted their share of the 50 million tokens.

Source: Coin Metrics ATLAS

Despite setting fee records at launch, Runes are already being viewed as a flop, with waning interest failing to match the hype leading up to the halving. Still, it’s taken the Ordinals ecosystem months to build the infrastructure needed for meaningful liquidity, and Runes are yet to be validated in the form of a major exchange listing, trading primarily on niche collectibles platforms. Meanwhile, miners can’t hold their breath — revenues are falling to existential levels, requiring the industry to revisit assumptions about forward-looking profitability.

Withered Hash

After the halving, simple revenue metrics suggest that mining revenues remain relatively high, averaging close to $30 million per day. However, total revenue ignores an important point, which is that miners are also spending significantly more on electricity. According to Coin ASIC Fingerprint estimates, the network now consumes about 21.5 GW of power, a 2x increase in the past 2 years.

By calculating the ratio of mining revenue to electricity consumption, we can get a better idea of ​​how miners’ income is doing relative to their main operating expenses. Mining revenue per megawatt (MRPM) is now around $13,000 per day, barely above the cost of $960/megawatt per day, with ultra-low electricity prices of $0.04/kWh. This brings electricity-adjusted revenue to its highest level since the FTX collapse, highlighting how tight the situation is for miners. Large miners earn more per megawatt (thanks to hardware upgrades) and have long-term contracts with lower electricity prices - nonetheless, MRPM shows that “average” miners are facing significant financial pressure in the post-halving era.

Source: Coin Metrics Network Data Pro & MINE-MATCH

A major concern leading up to each halving is the selling pressure that miners may introduce into the market. Due to the direct impact on revenue, miners may need to sell newly issued Bitcoin or liquidate existing holdings to cover OpEx or to fund expansion efforts, such as acquiring more efficient ASICs.

However, Bitcoin’s daily issuance provides us with a baseline for selling pressure, which dropped from 900 BTC to 450 BTC after the halving. Notably, the roughly $55 million pre-halving issuance is closely aligned with Bitcoin’s 1% liquidity requirement, highlighting the market’s ability to absorb miner selling. With issuance reduced by roughly $26 million, Bitcoin’s sell-side liquidity remains strong, suggesting that the market can easily absorb additional miner selling pressure without a significant impact on BTC prices.

Source: Coin Metrics Network Data Pro & Market Data Feed

Financial pressure on miners has increased due to reduced profits caused by the reward halving, coupled with rising electricity costs. The weekly hash rate fell 11.2% from 650 EH/s to 577 EH/s, indicating that miners are evaluating their feasibility of operating under tighter profit margins. However, Bitcoin’s recent -5.62% difficulty adjustment - the largest downward adjustment since late 2022 - will relieve some of the pressure by easing the work required to mine new blocks.

Source: Coin Metrics Network Data Pro

in conclusion

The reduction in Bitcoin issuance is the most predictable event for cryptocurrencies, but the 2024 halving is a notable one for a number of reasons. Relative to past halvings, the mining industry has reached unprecedented scale, with millions of dollars invested in hardware and infrastructure. With fees unable to offset the decline in overall subsidies, it is questionable whether many large-scale operations can remain viable. New protocols like Runes provide a catalyst to increase revenue, but these markets are still immature, leaving a large gap in mining profitability assumptions.

As for the impact of the halving on market structure, over the years, the adjustment has arguably been “priced in”. However, liquidity indicators show that miner selling pressure has now subsided, with issuance well below the threshold required to meaningfully move BTC prices. Regardless, the long-term impact has yet to materialize — while future performance is not guaranteed, Bitcoin’s most significant periods of appreciation tend to occur in the months following a halving. For now, the demand side is back in the driving seat, and the impact of the halving on the crypto narrative is fading.