Memecoin mania sent Bitcoin fees soaring during the ‘halving’

THE fear of missing out on the latest breed of memecoins helped to briefly temper the potential blow of a Bitcoin software update to the companies that make money by ensuring that the digital currency functions smoothly and securely.

Transaction fees jumped to US$82 million as users rushed on Saturday (Apr 20) to mint the speculative tokens on Bitcoin, according to crypto-mining researcher TheMinerMag. The process is enabled by the Rune protocol, through which people can create their own fungible tokens. Similar digital assets issued on other blockchains including Ethereum and Solana, such as Dogwifhat’s WIF and Bonk, have been among the top-performing assets this year.

The Rune protocol is the brainchild of developer Casey Rodarmor, who also created another mechanism that allows people to make non-fungible tokens on the blockchain. Users pay extra high fees to Bitcoin miners, who use specialised computers to verify data on the network, so that their orders can be finalised and be the first to make a memecoin they believe to be valuable.

The launch of the Bitcoin memecoins took place following another high-profile event. Called the halving, the quadrennial code update slashes the mining subsidy by half every four years. The subsidy is the fixed amount of Bitcoin rewarded to a miner when they are the first to successfully process a block of data. It is the other revenue source for miners besides the transaction fees and has been the main income for the miners.

But the transaction fees far exceeded mining subsidies amid the Bitcoin memecoin frenzy, contributing to around 75 per cent of the total revenue for Bitcoin miners. The total mining revenue was paid out in the form of 1,675 Bitcoin, amounting to about US$109 million at the time.

The halving has been a positive catalyst for Bitcoin prices since it reduces the supply of new tokens but miners are set to lose over US$10 billion in revenue a year as the daily production has dropped to 450 Bitcoin from 900. The miners will have to rely more on transaction fees generated from payment or minting of the new memecoins to stay afloat as the mining subsidy dwindle. Still, the hike in mining revenue has started wanning, coming down from a two-year high, according to data from crypto-mining services provider Luxor Technology. BLOOMBERG