Hype around BRC-20 tokens drives surge in Bitcoin miners’ revenues

Daily Bitcoin miner fee revenue per block, for the fifth time in history, surpassed the block reward from mining (6.25 BTC). Glassnode analysts attributed the development to the increased issuance of BRC-20 tokens.

#Bitcoin experienced an unexpected demand for blockspace last week, as speculators rushed to mint BRC-20 tokens.

This resulted in immense fee pressure, miner fee revenue near ATHs, and fees surpassing the $BTC block subsidy for the fifth time ever.https://t.co/wrfu9jGazG

— glassnode (@glassnode) May 15, 2023

During May, miners earned $100 million from fees and $773 million — from block creation. The share of the first metric from total revenues reached 11.5%, coinciding with elevated levels observed during the bull markets of 2017 and 2021.

Miner revenues per hash rate (hashprice) briefly jumped to $172,200/EH, before dropping 55% to $76,300/EH as fee pressure eased.

“The surge in demand for blockchain space has driven a positive rise in miners’ revenues, but so far it’s not long-lasting and fades relative to the downward trend (in log scale) of hashprice,” the analysts noted.

From the 3,275 BTC paid to miners over the last two weeks, their aggregate balance increased by only 655 BTC (~20% of the fees paid). As shown in the diagram below, they still spend around 100% of the revenues received (highlighted in blue).

“Most of the miners’ revenues have been allocated, which likely provided relief after the challenging bear market of 2022,” the analysts noted.

BRC-20 are based on the mechanism of the Ordinals project. Their deployment occurs by adding JSON text files to the blockchain.

Given the relatively small size of data for these \”inscriptions\” and the high fees users of BRC-20 were willing to pay, miners were able to fill blocks with a record number of transactions.

Last week, the daily metric jumped to ATH of about 682,000, surpassing the 2017 peak (490,000) by 39%. The average number of transactions per block reached 4,372 versus the standard 1,600-2,500.

Because of the small size of the \”inscriptions\” for BRC-20 and the 75% discount applied to data SegWit, the average transaction size shrank to 405 bytes — close to record-low. The situation contrasts with the Ordinals boom, during which the metric reached about 1.5 kilobytes.

Text inscriptions displaced other formats such as images and audio. On certain days users generated more than 350,000 such objects.

As a result, text inscriptions accounted for more than half of all Bitcoin transactions. By comparison, in the first wave of the Ordinals boom, the metric ranged from 5–20%.

Text inscriptions became the most popular format (totaling 5.69 million), ahead of the rest — 89% of the total.

The congested mempool contributed to fee revenue surpassing block rewards for the fifth time in history. The last time this occurred was at the peak of the 2017 bull market. The duration of such an occurrence has always been limited to a few days.

At the height of the BRC-20 hype, the average per-block fee reached 6.66 BTC, with total miner revenue at 12.9 BTC (~$348,000), according to the analysts.

All told, thanks to the inscriptions, miners earned about 1,262 BTC in fees. Of these, 1,090 BTC (86%) were paid out in the last week, according to experts.

In monetary terms, daily fees reached $17.8 million. As a result, the median and the average cost of a standard transfer rose to $20.17 and $30.8, respectively.

“Will the ‘inscriptions’ and BRC-20 tokens retain their power in the long term? Debates about their technical, practical, and philosophical merits have arisen. For now, it has become clear that these technologies have brought a new buyer of block space,” the analysts concluded.

Previously, the market capitalization of BRC-20 tokens reached $650 million.

Earlier, Bitcoin Core developer Luke Dashjr proposed banning the BRC-20 and Ordinals tokens.

In May 2023, the OmniBOLT-related team announced that it was working on integrating BRC-20 tokens into Lightning Network “for faster and more efficient transactions”.