In what appears to be an unprecedented move, bitcoin’s hashprice has spiked to two-year highs even though the halving event on April 20 UTC slashed each block’s subsidy by 50% to 3.125 BTC.
Public data shows that bitcoin’s hashprice, the dollar value of revenue that each PH/s of computing power generates daily, has shot up to $178/PH/s within 24 hours after bitcoin’s halving at 00:09 UTC on Saturday. That is the highest level since April 22, 2022, according to data from Luxor’s Hashrate Index.
The hashprice increase results from elevated transaction fees due to on-chain activities relating to the Rune protocol on bitcoin’s network that was activated following bitcoin’s fourth halving on block height 840,000.
In the 130 blocks after halving, bitcoin miner operators across the network combined have received 1,675 BTC as rewards, worth $109 million. 75% of this, amounting to 1,262 BTC, came from transaction fees, totaling $82 million. For context, miner operators bagged 1,349 BTC in transaction fees from April 1 to April 19 UTC.
In other words, mining participants received nearly as much transaction fees on the halving day alone as they did in the first 19 days of this month combined. As reported earlier, the halving block itself saw 37 BTC, worth $2.4 million, attached as transaction fees.
Rune protocol
The soaring transaction fees resulted from on-chain users rushing to create meme-like tokens on bitcoin using the Rune protocol, which is similar to the ERC-20 standard for creating tokens on Ethereum.
Although tokens created on Rune are fungible, the values are subject to speculations on various measures such as how early they were created, the uniqueness and quality of their symbols, and the potential of being listed on exchanges.
According to a Rune explorer, 1,750 Rune projects have been created as of writing, or as the protocol terms it, “etched.” For instance, some of the early “etched” projects are called “MASSIVE•PILE•OF•SHIT” or “DOG•GO•TO•THE•MOON“
Because the protocol utilizes bitcoin’s UTXO (unspent transaction output) model, it creates a mechanism where a user’s transaction for a token issuance will first enter bitcoin’s mempool and will be successfully created after the transaction is confirmed.
As bitcoin influencer Jimmy Song put it here, explaining the current fee market dynamics, this mechanism also creates room for “squatters” to snipe a user’s creation by outbidding them using a higher fee.
“Whichever comes first gets the symbol and the asset issuance. But if you want to squat on a good symbol name, you can just look for mempool transactions that are attempting to create a new asset and create your own with a bigger fee,” Song wrote.
It remains to be seen how much longer such heated on-chain activities will last. It appears that transaction fees have already been declining since the halving block while bitcoin’s hashrate rises to 650 EH/s. As of writing, the median fee for sending bitcoin transactions has come down to 168 sats, worth about $15 at bitcoin’s current price.
