Bitcoin miner income is on the decline despite rising network fees – why?

Posted: September 28, 2023

• Bitcoin’s community charges have elevated considerably for the reason that launch of Inscriptions and Ordinals in February.
• Nevertheless, miners’ earnings from the identical has diminished.

The earnings of Bitcoin [BTC] miners has remained comparatively low regardless of the spike in whole community charges and the proportion of miner earnings from these charges witnessed up to now few months, Glassnode present in a brand new report.

In keeping with the on-chain information supplier, the exercise of Inscriptions and Ordinals on the Bitcoin community resulted in an uptick in demand for blockspace. Since their launch in February, “this elevated demand has been sustained,” Glassnode discovered.

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As customers explored the newly found emergence of non-fungible tokens (NFTs) within the type of texts and pictures on the chain, consumer exercise on the Bitcoin community climbed, inflicting the demand for blockspace to develop quickly. With transactions filling up the Bitcoin mempool, community charges elevated. 

Supply: Glassnode

In keeping with Glassnode, “whole charges have elevated by 216% from ~12 BTC/day to 38 BTC/day, and the proportion of the miner earnings from charges has elevated from 1% to 4%.”

Nevertheless, whereas these increments have been important, the information supplier discovered that they remained small “in an absolute and historic context.”

Too many miners, not sufficient charges

Following the launch of Inscriptions and Ordinals in February and the ensuing progress in demand for blockspace on the Bitcoin community, the market noticed a renewed curiosity in mining exercise on the community. The launch of newer ASIC rigs additionally contributed to a rise in new demand for mining on the community

Moreso, on the time, BTC’s worth launched into an upward trajectory, and its worth had grown by over 40% since 1 January, incentivizing many extra to hitch the mining neighborhood on the chain. 

On account of this, the quantity of hashrate competing for mining rewards elevated. In keeping with Glassnode, this has gone up by 50% since February.

Supply: Glassnode

Whereas community charges and miners’ share of the identical has seen a corresponding improve since February, the reward earned per Exahash has been pushed to new all-time lows as a result of surge within the variety of miners all competing for a similar rewards. 

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In keeping with Glassnode, “miners will now earn simply 2.26 BTC (~$60k) per Exahash lively on the community.”

Supply: Glassnode

The report discovered additional that miners on the Bitcoin community “could also be getting ready to turning into unprofitable.” It’s because the common miner acquisition value sat at a ten% premium decline to the present spot worth.