In addition to Runes, what trading needs will increase BTC Miner revenue?

Author: CoinShares

Compiler: Golem

This article was written by CoinShares researcher Matthew Kimmell ahead of the Bitcoin Halving and argues that Bitcoin transaction fees can offset the impact of Halving on Miner. The first half of the article predicts that when Runes goes online, Miner fee income will reach at least 150btc/day (in fact, the first day of the line is 1070btc/day, and it has not fallen below 150btc every day so far); the second half mainly explains that in addition to Runes, there are 3 other transactions that can increase Miner's income.

Because the first half of the original text is mainly a prediction after the halving, it is outdated, so it will not be compiled in this article. This article mainly extracts the second half of the original article Matthew Kimmell believes that in addition to Runes, there are 3 other Bitcoin transaction needs that can increase Miner's income for readers' reference.

On-chain collectibles with rare Satoshi

The release of the Ordinals protocol reveals a tracking system that users voluntarily agree to Satoshi the smallest unit of Bitcoin (equivalent to 0.00000001 or 10^-8 btc). Protocol to the Ordinals protocol, each Satoshi is assigned an ordered number. By adopting such a standard, Satoshi from the first dug up to the last released Satoshi is marked and identified along a sequential number. In other words, when looking at the smallest unit of Bitcoin in this way, each Satoshi becomes an independent non-fungible unit.

Users also have the option to attach any data file to the Satoshi they have to add an extra layer of uniqueness. These files are known as inscriptions, and users can mix the inscriptions with any Satoshi they have, while retaining the ability to transmit and store such modified Satoshi on the Bitcoin network, just like regular Bitcoin.

As a result, Xu long Satoshi are now all tagged with images, text, and even full video game files, making them uniquely distinguishable from each other and providing investors with different reasons to evaluate the value of these Satoshi.

Because of the unique numerical meaning of the serial number itself or the related inscriptions inscribed, some of the collectible value of Satoshi has been proven in the market.

In the first example, an Satoshi inscribed with an image called "Genesis Cat" was sold for $240,000 and was hailed as a unique 1/1 work of art with cultural and political significance, as well as being part of inscription the Quantum Cat series, which was designed to symbolize and support previously deleted features in the recovery Bitcoin protocol. Another example is that a Satoshi that even without an inscription was sold for $165,100 because it was advertised as a Satoshi with a rare supply, dating back to Bitcoin's first difficulty retargeting period.

These high-priced sale events provide an incentive for those who are looking for valuable Satoshi on the on-chain. The purpose of selling Satoshi on the secondary market at a much higher price than the general market is changing the tendency of some users to pay Money Laundering. It is safe to say that in order to collect a Satoshi of special significance and sell it on the market for a profit of up to hundreds of thousands of dollars, competitors will give longer higher fees than ordinary transactions.

Given that Halving is a completely predictable and scarce event in Bitcoin history, there is bound to be competition in collecting rare Satoshi and etching the runes of the first Block. It is expected that the first Satoshi mined after the Halving will be so valuable that Foundry USA Mining Pool even plans to share the proceeds with Miner in order to win the Block mining rights. This may be short-lived, but this fierce competition will certainly lead to a spike in fees.

Private transaction requirements

Another atypical need could be a trading accelerator. Marathon launched a product called Slipstream in late February, opening up a way for users to bypass Bitcoin memory pool (the packing waiting area for transactions) by Mining Pool direct communication and payment transactions to MARA. While the product doesn't offer much of an advantage in earning fees compared to other mining pools, there are still several examples of success.

While not widespread, accelerators like Slipstream have the potential to increase costs indirectly when there is sufficient demand. If a transaction is submitted directly to a mining pool, the transaction will not be known to any other Bitcoin user in advance. As a result, other users may find that their transactions within the Block Rate Range actually need to continue waiting, because low-fee transactions submitted directly to the Mining Pool are covertly packed into blocks, but this does not reflect the true rate situation. This can confuse consumers as to whether a long fee should be attached to speed up the transaction. As more and more long transactions flow to these accelerators, long fee markets will emerge, some of which are public as part of the Bitcoin protocol, while others are private.

In a state where transactions need to be confirmed quickly, this confusion in the private fee market can lead to user overpayments compared to actual fee expectations in the open market. But it's worth noting that we're not seeing this happen on a large scale at the moment.

Miner Extractable Value (MEV)

MEV is another emerging dimension of Bitcoin Block short demand. MEV refers to a situation where a miner (or mining pool) has the opportunity to earn additional profit by manipulating the order of transactions within a block. Previously, MEV was a potential feature of Bitcoin and was limited because of Bitcoin's strict functional limitations and simple transaction model. However, MEV has become more pronounced due to changes in the Bitcoin software and the nature of Bitcoin transactions made by users. Here are 3 possible sources of MEV revenue:

1. On-chain collectibles: Because some inscriptions and Satoshi have high value, while market technology is still relatively inefficient, it becomes possible to obtain additional income by buying, sniping and reselling mispriced assets, and even Miners at the expense of fee income to grab higher value Satoshi.

2. Tokenization assets: Runes, BRC-20, RBG, Taproot assets, and other possible Token assets, opening the door for Miners to participate in front-running and Arbitrage transactions for additional rewards.

3. Bitcoin plugins: As more and more long external platforms or Bitcoin L2 use Bitcoin as a Settlement, Miner may be able to exploit vulnerabilities in earlier designs and additional incentives for them (such as merged mining) to generate higher revenue.

This Halving means a further reduction in the Block Reward and a relative increase in the importance of transaction fees for Miners. This may provide additional incentives for Miners to seek transaction-related benefits and look for longer sources of income. So we believe that MEV will at least be tried.

Summary

Bitcoin transaction demand Longest could be a lifesaver for the Mining economy. As Halving incidents decrease Block Reward, these new uses in the Bitcoin Block short could significantly increase Money Laundering. This is crucial for Miners, as these fees offset the loss of the Block Reward and maintain its profitability.

As mentioned earlier, near-term Money Laundering will increase significantly due to competition in new market segments, including the issuance of assets and the search for unique collectibles. Not only do these applications introduce additional Money Laundering, but they may also encourage the emergence of more strategic methods of transaction processing.

At the end of the day, Miner's shift to a more complex and Money Laundering-dependent economic model highlights the importance of understanding and leveraging new Bitcoin transactions to remain competitive.

Going forward, I expect it to be well over 50% of Mining revenue in some Block Money Laundering. Looking back at the two-month period at the end of 2023, which was mainly influenced by the inscription market, the average Money Laundering accounted for 30% of the post-Halving Mining revenue, and if this average (193 BTC/day) is maintained, it will make up for 43% of the Halving's impact on Miner revenue.

However, the sustainability of these transactions, driven by the demand of non-Bitcoin itself, remains an open mystery – are they leading long-term change in the Bitcoin trading market, or are they just a short-lived symptom of a Bull Market?