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Bitcoin fees are skyrocketing: What’s causing it, and why can it be good?

Nazar Didyk

22.05.2024

4 Min Read

As a CMO or Web 3.0 marketer, keeping up with industry developments is vital. Here is a knowledge booster for you. Learn about Halving, Runes, and future challenges.

The flip side of Bitcoin Halving: Security Budget Issue

Bitcoin halving reduces the reward for mining new blocks by half approximately every four years. The flip side of this design is the rising security budget issue.

 

The Security Budget is the money amount paid to miners, which determines the amount they are willing to invest in mining equipment.

“Security budget” is not an official Bitcoin term; it isn’t a budget set by a committee or governing body. It’s simply a term used for discussing Bitcoin’s level of security. An alternative term is “total miner revenue”.

The security budget ensures network security by making it costly to attack, as conducting a 51% attack would require significant resources and expenditure equal to or more than 51% of all mining costs.

What is the problem?

As halving decreases rewards, the cost of attack decreases as well. To maintain security, Bitcoin’s value or transaction fees must significantly increase. There are even talks of raising the 21m Bitcoin bar to ensure sufficient rewards for miners.

 

Here is a great visualization of the problem from https://x.com/BTCillustrated

According to btcsecuritybudget.com, by the 2030s, a declining security budget could pose risks. Unlike miners, attackers like governments might not seek profit, using even non-profitable energy sources to undermine Bitcoin’s security without a profit motive.

Why did we bring up Security Budget: Introduction to Runes

According to Glassnode, Runes transactions generated a cumulative $117 million in Bitcoin network fee revenue after the halving.

 

Although this number quickly faded, with Runes generating only $1.03 million in fees as of April 28, it still brought attention to the Bitcoin network and showed the potential for increasing fees.

Increased fees More miners incentivized More miners securing the network Network becomes harder to attack

This is a step towards solving the security budget problem

But what are the Runes?

Runes Protocol is a new token standard on Bitcoin. Runes make it easier and more efficient for users to create tokens on the Bitcoin blockchain.

How does it work?

In Ethereum, transactions involve sending a specific amount from one address to another. Bitcoin, however, uses something called UTXOs, or Unspent Transaction Outputs. Picture UTXOs as a loose change from your previous Bitcoin transactions. This “change” hasn’t been spent yet and is available to use for new transactions.

 

For example, if you buy a meal for $15 using a $20 bill, you receive $5 in change. In the Bitcoin world, this $5 is a UTXO that goes back into your wallet, ready for future spending.

 

Runes is a protocol that utilises this transaction system to create tokens, similar to creating coins from a larger sum. The process begins with a “genesis” UTXO, which details the rune’s properties like name and supply. This UTXO can then be “etched” to create smaller, tradeable pieces, or runes, effectively using the Bitcoin transaction mechanism to manage and distribute tokens.

Is Bitcoin saved?: Future Outlook

As the retrospective analysis and David show, we must rely on more than just Runes or any other single protocol to solve a problem of this magnitude.

 

There is a list of solutions to address the security budget problem, for example, check out the “Solutions” block at btcsecuritybudget.com.

 

It is not the end of Bitcoin. But as an industry, we should support the developers and new solutions to support the Bitcoin Network.

This is exactly what Solus Group has been doing by investing in, fundraising, and providing marketing services to Bitcoin-based projects.

Speaking of marketing: How to market your Bitcoin project?

Effectively marketing a Bitcoin-based project is not drastically different from any other project, but it does require a deep understanding of the unique dynamics of the ecosystem.

Conclusion

Is your Bitcoin project ready for the big leagues? We’re here to build your global presence with KOL marketing, geo-specific strategies, and professional consulting.

 

Reach out and keep the development going!

Bitcoin

Runes Protocol

Security Budget

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