Golden Observation | Miner fees account for nearly 20% of block rewards, and the dark clouds over BTC may have dissipated

“In a few decades, when [block] rewards become trivial, transaction fees will be the main compensation for [miners].” — Satoshi Nakamoto

For a long time, there has been a dark cloud floating over Bitcoin, and it is also the thing that Satoshi Nakamoto is most worried about. That is, when Bitcoin has been halved multiple times, whether there is enough block incentive for miners to continue mining to package transactions and maintain the security of the Bitcoin network.

In the early hours of May 12, 2020, Bitcoin successfully completed its third halving. As of today, the Bitcoin network has been running stably for nearly 3 days. Judging from the recent percentage of miners’ fees as a percentage of block rewards, the dark clouds over Bitcoin may be beginning to see light.

After Bitcoin is halved after the block height of 630,000, miners are rewarded 6.25 Bitcoins from Coinbase for mining a block. But in fact, the actual reward for each block is more than 6.25 bitcoins.

Golden Morning | List of important overnight news on July 8: 21:00-7:00 Keywords: Grayscale, Robinhood, CFTC, Ethereum mainnet

1. U.S. Senator Pat Toomey invested in Grayscale Bitcoin and Ethereum Trust;

2. Robinhood Crypto will pay NYDFS a fine of $15 million;

3. Former CFTC chairman: Bitcoin ETF is good for investors and regulators;

4. Argentine lawmakers propose to allow workers to receive wages in Bitcoin;

5. The Filecoin Foundation announced the launch of the Filecoin storage provider (miner) incubation center;

6. The London hard fork is scheduled to be activated on the Ethereum mainnet at block height 12965000;

7. New York senators submitted a bill that would require public officials in the state to disclose their cryptocurrency holdings annually;

8. Visa plans to build its cryptocurrency ecosystem to increase the usability of cryptocurrencies. [2021/7/8 0:35:24]

The figure below shows the rewards for the latest block as of this writing. It can be found that the rewards of most blocks are above 7 bitcoins. The reward of block 630320 reached 7.65 coins, 1.4 coins more than Coinbase rewards. These extra rewards come from the transaction fees that miners get for packaging bitcoin transactions, which is often referred to as miners’ fees. In this block, the miner fee accounted for nearly 20% of the block reward.

Jinse Finance Mining Data Report: ETH’s total network computing power rose by 4.28% today: Jinse Finance reported that according to the data from the Spider Mine Pool:

The computing power of the BTC network is 146.360EH/s, the mining difficulty is 18.60T, the current block height is 664391, and the theoretical income is 0.00000735/T/day.

The computing power of the entire ETH network is 304.684TH/s, the mining difficulty is 3854.90T, the current block height is 11585329, and the theoretical income is 0.00910088/100MH/day.

The BSV network computing power is 0.721EH/s, the mining difficulty is 0.10T, the current block height is 668491, and the theoretical income is 0.00124775/T/day.

The BCH network computing power is 2.402EH/s, the mining difficulty is 0.22, the current block height is 668776, and the theoretical income is 0.00037466/T/day. [2021/1/4 16:23:01]

Jinse Finance mining data broadcast | BCH network computing power dropped by 40.72% today: Jinse Finance reported, according to the data of the spider mining pool:

The computing power of the entire ETH network is 176.405TH/s, the mining difficulty is 2216.15T, the current block height is 9841412, and the theoretical income is 0.00793971/100MH/day.

The computing power of the BTC network is 107.110EH/s, the mining difficulty is 14.72T, the current block height is 625207, and the theoretical income is 0.00001708/T/day.

The computing power of BSV network is 2.973EH/s, the mining difficulty is 0.42T, the current block height is 630000, and the theoretical income is 0.00030276/T/day.

The BCH network computing power is 1.770EH/s, the mining difficulty is 0.25T, the current block height is 630104, and the theoretical income is 0.00050849/T/day. [2020/4/10]

It is conceivable that compared with before the halving, the proportion of miners' fees to block rewards after Bitcoin halving will increase significantly. The figure below shows the proportion of miners’ fees in block rewards for a complete day (May 13) just after halving. Miners’ fees accounted for nearly 15% of block rewards, which is ten times higher than the average level before halving Amplitude rises.

But does this save us from worrying about the problems that Satoshi Nakamoto once worried about? Let's analyze it.

Because the Bitcoin block reward is halved, it is estimated that 20%-30% of the computing power of inefficient mining machines will be shut down in the near future. However, Shenyu said at the Jinse Finance event on May 13 that the flood season is coming soon. If the factors of the decrease in difficulty and the increase in Bitcoin prices are not taken into account, the S9 may still have a profit of about one yuan a day when it is turned on during the flood season.

That is to say, even at the current currency price, in the next six months, because the S9 mining machines are all profitable, the computing power of the Bitcoin network will not drop significantly, so the performance of the Bitcoin network can be guaranteed.

In addition, considering the further scarcity of Bitcoin caused by the halving, as well as the continuous printing of money by central banks, the future price of Bitcoin is generally bullish. Institutional investors are now queuing up to get into Bitcoin. Data show that Grayscale Investment and CashApp have bought 50% of the Bitcoins mined in the first quarter of 2020 in 2020. Paul Tudor Jones, a Wall Street hedge fund tycoon, also said recently that he is already buying Bitcoins. JPMorgan Chase recently It also began to provide banking services to exchanges.

The characteristics of Bitcoin itself determine that it has value, and it is born with a positive feedback loop: the price of the currency rises, the number of users attracted increases, the number of users increases, the value of the currency increases, and more users are attracted.

If a new round of bull market comes, the mining fee of the Bitcoin network will increase significantly. Assuming back to the level of transaction volume in 2017, the figure below shows the proportion of miner fees to block rewards in 2017. In December of that year, the average miner fee per block reached 6.25 bitcoins. Except for September and October, the average miner fee per block reached 4-5 bitcoins.

In other words, as long as Bitcoin starts a new round of bull market, after the third Bitcoin halving, the problem of insufficient block rewards that people in the currency circle are worried about is expected to be resolved.

Perhaps, to truly witness the resolution of Satoshi Nakamoto's most worried problem, we need to wait until the fourth bitcoin halving, when the block reward will drop to 3.125 bitcoins, and the miner's fee will exceed 50%. Up, people don't have to worry that there are no miners securing the Bitcoin network.

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