A Bitcoin Miner's Perspective on the BRC-20 Tokens Wave and Bitcoin Mining Economics
The introduction of Ordinals and BRC-20 tokens has brought a new aspect to the revenue of Bitcoin miners. As we approach the Bitcoin halving event, where Block Rewards are reduced by 50%, coupled with the Network Hashrate and Difficulty reaching all-time highs, miners face increased challenges in finding new blocks. These innovations on the Bitcoin Blockchain have the potential to reshape the economics of mining.
In this article, I discuss the BRC-20 wave and Bitcoin network stats in the past two months. You can also listen the the audio version of this article on Hash-Op Podcast.
BRC-20 Tokens; New Dimension to Bitcoin Mining Economics
Bitcoin continues to surprise. After the rise of Ordinals in the beginning of this year which increased the activities on the Bitcoin blockchain and the demand for block space, minting BRC-20 tokens took the blockchain activities to a whole new level.
BRC-20 tokens are Bitcoin’s version of Ethereum tokens ERC-20. Without getting into the technical details, they basically use ordinal inscriptions to mint new tokens and transfer them on the Bitcoin blockchain.
The BRC-20 wave started in the last week of April and it increased the network activity and as result the transaction fees and miners’ rewards significantly before it cooled down in mid-May.
In May, miners collected 4500 Bitcoins only from transaction fees. This is almost double the total transaction fees paid to miners from January to April this year.
At some point, at block 788695, transaction fee was around 6.7 BTC which is more than the block reward of 6.25 BTC that miners are currently being rewarded with for finding new blocks. Total rewards for that specific block was 12.951 BTC.
At the time of this writing, more than 17 million ordinals and more than 37000 BRC-20 tokens have been created on the Bitcoin blockchain.
As Bitcoin miners, our team at Incrypt is happy about these new developments on the Bitcoin blockchain that increase the activities on the chain and also the excitement it can bring to the bitcoin community and even non-bitcoiners who like to explore new opportunities and like the speculation and fun.
Ordinals and BRC-20s have added a new dimension to Bitcoin Miners’ revenue and this is definitely a positive development for them. As network Hashrate and difficulty of network increase and the competition for block reward is growing more than ever, as we are getting closer to the halving event in less than a year, miners would love to see increased demand for block space and more activities on the blockchain through these innovations in the future.
Bitcoin Network is not Planning to Slow Down
There are no signs of slowing down in the Bitcoin network Hashrate. Network Hashrate reached 400 EH/s in mid-June, this is 60% more computing power added to the network compared to June 2022. To put this in perspective, to produce 400 EH/s you need 4 million S19 miners at 100 T/s and around 13 Gigawatt of power to run them.
Network Hashrate has gone down to 370 EH/s since mid-June. Part of this drop could be because of Bitcoin miners’ participation in ERCOT’s demand response program due to the heat wave that is currently hitting Texas.
With this level of increase in network Hashrate, seems like Bitcoin miners have been on a mission to add as much mining capacity to their operation through either adding to their mining fleet and replacing older generation mining machines with the newer and more efficient ones and they should continue to do so to prepare for the halving event and mine as many Bitcoins as they can before the rewards are cut in half.
And you know what else increases with the Hashrate? Yes, Network difficulty. Network difficulty reached a maximum of 52T in June, a 4T increase from 48T in the beginning of May.
Miners experienced multiple positive difficulty adjustments in May and June and two negative difficulty adjustment resulting in the 4T increase in the difficulty in total.
Bitcoin network difficulty has gone up 70% compared to a year ago when it was just shy of 30T in the end of June last year.
As we navigate the evolving landscape of Bitcoin mining, these developments present both challenges and opportunities for miners. The continued growth of the Bitcoin network and the innovations on the Bitcoin blockchain have the potential to shape the future of mining and the broader Bitcoin ecosystem.