- Bitcoin network fees spiked, costing $50-$52 per transaction due to a backlog of 332,000 unconfirmed transactions.
- Post-halving effects have intensified challenges for miners, decreasing profitability due to reduced block rewards.
- High network fees and extensive energy consumption are contributing to rising operational costs for miners.
The Bitcoin network recently saw a significant surge in transaction fees, triggered by a backlog of 332,000 transactions as of early June 7, Eastern Time. This increase in fees occurred concurrently with heightened network activity, attributed in part to actions taken by major centralized exchange OKX, although this has not been officially confirmed.
As of noon on June 7, the cost for prioritizing transactions on the Bitcoin network soared to 514 satoshis per byte for high-priority transactions and 513 satoshis for lower priorities. Earlier in the day, fees peaked at about 520 satoshis per byte, equivalent to $50 to $52 per transaction. Following these peaks, the fees dipped slightly to around $46 for each high-priority transaction.
This spike in transaction fees coincides with a report from blockchain journalist Colin Wu, who suggested that the unconfirmed transactions may stem from the exchange OKX as it undergoes wallet maintenance and reorganization. However, OKX has not provided a statement regarding these claims.
Impacts on Mining and Profitability
The recent Bitcoin halving event, which reduced the block reward from 6.25 BTC to 3.125 BTC, has significantly affected miners’ profitability. This was exemplified by Bitfarms, a prominent mining company, which reported a 42% decline in mining revenue for May—the first full month following the halving. The company mined 156 BTC in May, down from 269 BTC in April.
Compounding the challenges faced by Bitfarms were adverse weather conditions in Argentina. The company’s Rio Cuarto facility experienced some of its coldest weather in 44 years, leading to an eight-day operational shutdown and further diminishing the month’s Bitcoin yield.
Energy Consumption and Economic Impact
The surge in network fees and the reduced block rewards have led to an increase in the operational costs for miners, particularly in terms of energy consumption. Paul Hoffman, an industry analyst, noted that U.S. Bitcoin miners have expended approximately $2.7 billion on electricity since the beginning of 2024. He highlighted that the energy consumed by these mining operations since the start of the year could power 1.5% of U.S. households for a full year.
The cost of mining a single Bitcoin has also escalated dramatically. Pre-halving figures in April indicated that it cost around $52,000 to mine one Bitcoin, whereas post-halving costs have more than doubled, averaging $110,000 per Bitcoin.
This sharp rise in operational costs, compounded by the latest surge in transaction fees and the increasing backlog of unconfirmed transactions, paints a complex picture for the future profitability and sustainability of Bitcoin mining under current conditions.
