WTF Will Fees Do At The Halving?

Study: DeGods

AuthorAuthor

William Foxley & Charlie Spears
April 15, 2024

15 April  2024 · Block Height 839320 · Bitcoin Price $65K

Happy (?) Tax Day! We got lots of content to get your mind off your bank account and Uncle Sam.

The biggest question of the halving is just how crazy will Block 840,000 get? Let’s do a case study.

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WTF will fees do at the Halving?

The halving is five days away! And with the rise of Ordinals, it’s fair to argue Block 840,000 could be the most anticipated fee event in Bitcoin’s history.

Why is the halving block notable? Ordinal Theory creator Casey Rodarmor launches his new fungible token protocol, Runes, at the 4th Bitcoin halving block #840,000. At that block height, anyone can create a Runes ticker and start minting tokens from that Runes ticker. With the insane attention & “Runes Mania” reaching a frenzy, things are shaping up to be fireworks right on the Bitcoin halving block as the entire ordinals & degen ecosystem competes to be the “first” to create or mint Runes.

What is different this time? Fee spikes on Bitcoin have historically been caused by several things such as: increased activity (usually during a bull market), exchange consolidations, empty blocks (like during the block size war), or slow block time. However none of these examples really maps well onto the scenario facing us this week: We know the exact block height that everyone wants to get into weeks in advance.

There’s really only one historical example that I am aware of that maps onto the halving block: The DeGods Auction block.

Popular NFT Collection DeGods made a splash in Ordinals early on with the famous “DeGods Block”. These 535 inscriptions were then auctioned off in a custom auction technique on May 17, 2023.

The auction was a bidding mechanism where the first bidders to come in after a block height would win one of the DeGods inscriptions. This created a similar well-telegraphed block height of very intense transaction demand not unlike what we expect to see at the halving block #840,000.

In between blocks 781,278 & the DeGods auction block 781,279, we saw fees skyrocket over 2,500%! A chainsplit at that very block height caused a flurry of discussion (or should we say suspicion!) if a reorg had occurred as well.

Both Antpool and ViaBTC blocks came in after Foundry hit an “orphan block,” in what some called a series of events highly suspicious. Others pointed out that it could have been misidentification of a normal orphaned block. Either way, Antpool got juicy fees from the auction block!

Parker Merritt of Coin Metrics depicted the chainsplit below, where both Foundry and ViaBTC mined the same block height, later causing two versions of Bitcoin’s chain to be formed. One chain, 0388f, was later abandoned as the incorrect Bitcoin chain.

So back to the fees: If we consider that there were ~2000 bids in the DeGods block resulting in a 2,500% fee increase intra-block, a comparable 25x increase in fees from the current average fee per block of 1.314 BTC, that would indicate a lower bound of 32.85 BTC in fees in block 840,000, or about $2.13 million.

If we consider that not only is this a much bigger event than the DeGods block–but it’s much more telegraphed across the entire Bitcoin industry–we could predict that the expected fees in block 840,000 are multiples above that. Suddenly, a +$5 million block reward does not seem outlandish.

Coming back down to earth. I still have a hard time imagining that we will actually see that much bidding for the exact block 840,000. But stranger things have happened on Bitcoin, and perhaps I’m being too conservative.

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