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Bitcoin successfully completed its fourth halving at block height 840,000, reducing the mining reward from 6.25 bitcoins to 3.125 bitcoins. Following this halving, Bitcoin's inflation rate dropped from 1.75% to 0.85%, roughly half of the gold supply growth rate, making Bitcoin an asset even scarcer than gold.
In the short term following the halving, miners' earnings may be directly impacted. However, with the simultaneous launch of Bitcoin Ordinals, on-chain transaction fees on Bitcoin have risen sharply in the past two days. In the first 100 blocks after the halving, miners not only avoided negative impacts but actually earned higher income.
Despite the majority of miners' income still coming from block rewards, the gradual reduction of these rewards over time raises the pressing question of how to incentivize miners to continue participating in and securing the blockchain network. There are two ways to increase miner motivation during the halving cycle: firstly, by increasing the value of the fixed block rewards through Bitcoin appreciation, and secondly, by improving the income structure from transaction fees.
According to Bitcoin's white paper, once a fixed quantity of Bitcoin begins circulating, transaction fees will become the primary incentive for miners. The Bitcoin network will be immune to inflation, which is a key aspect of the design logic of the Bitcoin protocol.
Since 2023, the Bitcoin ecosystem has continued to grow, and the activity on the Bitcoin network has significantly changed compared to the last halving. The proportion of transaction fees in miners' income has steadily increased. Data shows that Bitcoin Ordinals transactions account for around 40% of current Bitcoin network transactions, and transaction fees account for over 20% of miners' income, bringing in more than $200 million in revenue.
Although most miner revenue still comes from block rewards, the excitement brought by Bitcoin Ordinals after the halving may be challenging to sustain over a long period. However, this short-lived phenomenon demonstrates that even without block rewards, the growth in on-chain transaction fees could theoretically provide miners with continuous positive incentives. Maintaining this scenario requires sufficient on-chain activity and users willing to pay reasonable fees for these activities.
In the past, transactions solely for payments and transfers of Bitcoin could not offset the decrease in miner revenue caused by the halving. Therefore, more innovative on-chain applications like Bitcoin Ordinals are needed to attract market attention and create additional value. These high-traffic, high-value innovative applications will continue to emerge, boosting the activity of the Bitcoin ecosystem and ensuring that miners, users, and institutions all benefit.
From this perspective, the Bitcoin halving has somewhat driven the development of the Bitcoin on-chain ecosystem and may act as a catalyst for accelerated innovation. As the Bitcoin ecosystem continues to thrive, the impact of future halving events on the market will decrease. Although we still pay attention to the halving, it may increasingly become more of a symbolic event in the cycle rather than a key factor in price trends.
In the short term following the halving, miners' earnings may be directly impacted. However, with the simultaneous launch of Bitcoin Ordinals, on-chain transaction fees on Bitcoin have risen sharply in the past two days. In the first 100 blocks after the halving, miners not only avoided negative impacts but actually earned higher income.
Despite the majority of miners' income still coming from block rewards, the gradual reduction of these rewards over time raises the pressing question of how to incentivize miners to continue participating in and securing the blockchain network. There are two ways to increase miner motivation during the halving cycle: firstly, by increasing the value of the fixed block rewards through Bitcoin appreciation, and secondly, by improving the income structure from transaction fees.
According to Bitcoin's white paper, once a fixed quantity of Bitcoin begins circulating, transaction fees will become the primary incentive for miners. The Bitcoin network will be immune to inflation, which is a key aspect of the design logic of the Bitcoin protocol.
Since 2023, the Bitcoin ecosystem has continued to grow, and the activity on the Bitcoin network has significantly changed compared to the last halving. The proportion of transaction fees in miners' income has steadily increased. Data shows that Bitcoin Ordinals transactions account for around 40% of current Bitcoin network transactions, and transaction fees account for over 20% of miners' income, bringing in more than $200 million in revenue.
Although most miner revenue still comes from block rewards, the excitement brought by Bitcoin Ordinals after the halving may be challenging to sustain over a long period. However, this short-lived phenomenon demonstrates that even without block rewards, the growth in on-chain transaction fees could theoretically provide miners with continuous positive incentives. Maintaining this scenario requires sufficient on-chain activity and users willing to pay reasonable fees for these activities.
In the past, transactions solely for payments and transfers of Bitcoin could not offset the decrease in miner revenue caused by the halving. Therefore, more innovative on-chain applications like Bitcoin Ordinals are needed to attract market attention and create additional value. These high-traffic, high-value innovative applications will continue to emerge, boosting the activity of the Bitcoin ecosystem and ensuring that miners, users, and institutions all benefit.
From this perspective, the Bitcoin halving has somewhat driven the development of the Bitcoin on-chain ecosystem and may act as a catalyst for accelerated innovation. As the Bitcoin ecosystem continues to thrive, the impact of future halving events on the market will decrease. Although we still pay attention to the halving, it may increasingly become more of a symbolic event in the cycle rather than a key factor in price trends.
