Bitcoin's Diminishing Fee Market and Security Vulnerabilities: Evaluating Long-Term Network Viability and Miner Sustainability in a Post-Halving Era

The Bitcoin network, once hailed as the ultimate decentralized ledger, now faces a critical juncture. Post-2024 halving, the interplay between a shrinking fee market and growing security vulnerabilities has sparked debates about the long-term sustainability of both miner operations and the network's resilience. For investors, understanding these dynamics is essential to navigating the evolving risks and opportunities in the Bitcoin ecosystem.

The Fee Market's Decline: A Shift in Miner Incentives

Bitcoin's fee market, which once surged post-2020 halving, has entered a period of suppression. In the year following the 2024 halving, total transaction fees amounted to just over 8,000 BTC, a stark contrast to the 37,000 BTC collected in the first year after the 2020 halving. This decline reflects a broader shift in miner revenue sources: block rewards (3.125 BTC per block post-2024) now dwarf fees, which have remained consistently below the block reward threshold.

The Runes protocol, introduced in 2024, initially drove a spike in block space demand by enabling fungible token issuance on Bitcoin's blockchain. However, this surge proved short-lived, and fees have since stabilized at levels insufficient to offset the halving's impact on miner profitability. With Bitcoin's price failing to recover robustly, miners are increasingly dependent on price appreciation rather than on-chain activity for revenue. This creates a precarious feedback loop: lower fees reduce miner incentives, which could lead to a drop in hash rate and heightened vulnerability to attacks.

Centralization Risks: The 51% Threat and Hash Rate Concentration

The most pressing security vulnerability in the post-2024 era is the centralization of mining power. Foundry USA and AntPool now control over 51% of the network's hashrate, a threshold that theoretically enables a 51% attack. While such an attack remains economically implausible due to the $1.1 trillion infrastructure and energy costs required, the perception of vulnerability has already impacted market sentiment. In 2025, this centralization contributed to a 12% price decline over six months, despite no actual attacks occurring.

This concentration undermines Bitcoin's core ethos of decentralization. Historically, the network's design discouraged centralization by creating a self-defeating incentive structure: miners profit from Bitcoin's value, and an attack would devalue the asset they seek to control. However, the rise of institutional adoption—6% of Bitcoin's supply now held via ETFs and corporate treasuries—has introduced new layers of complexity. While institutionalization has stabilized liquidity, it has also concentrated ownership, raising concerns about coordinated market manipulation.

The Path to a Fee-Driven Security Model: Challenges and Opportunities

Bitcoin's long-term viability hinges on its ability to transition to a fee-driven security model. Currently, fees represent just 0.25% of Bitcoin's market capitalization, far below the 0.5%–1.5% threshold needed to ensure robust security. Achieving this requires sustained on-chain transaction activity, which in turn depends on Bitcoin's adoption as a settlement layer for large-value transactions.

Layer-two solutions like the Lightning Network and centralized exchanges already help scale the network by batching transactions off-chain. However, these solutions do not eliminate the need for a healthy base layer fee market. If fees fail to grow in tandem with Bitcoin's settlement value, the network could face underfunding, making 51% attacks economically viable for well-capitalized adversaries.

Investment Implications: Navigating the Risks

For investors, the key risks lie in the interplay between fee suppression, hash rate centralization, and Bitcoin's price trajectory. Here are three strategic considerations:

1. Monitor Hash Rate Dynamics: Real-time tracking of mining pool distributions is critical. A further concentration of hashrate could trigger regulatory scrutiny or forced divestitures under antitrust measures, as seen with the Genius Act. Investors should also watch for geographic diversification of mining operations, which adds redundancy to the network.

2. Diversify Crypto Holdings: While Bitcoin remains a cornerstone of digital assets, its centralization risks warrant a diversified portfolio. Allocating to altcoins with robust fee models or layer-two solutions can hedge against Bitcoin's vulnerabilities.

3. Assess Price-Driven Security: Bitcoin's price performance is now the primary determinant of miner sustainability. Investors should evaluate macroeconomic factors—such as regulatory clarity and institutional demand—that could drive price appreciation and, by extension, network security.

Conclusion: A Network at a Crossroads

Bitcoin's post-2024 halving era is defined by a delicate balance between fee-driven security and hash rate centralization. While the network's technical safeguards and geographic diversity provide resilience, the perception of vulnerability remains a potent market driver. For investors, the challenge lies in navigating this tension by prioritizing transparency, diversification, and a long-term view of Bitcoin's evolving role as both a store of value and a decentralized settlement layer.

As the ecosystem continues to adapt, the next halving in 2026 will be a pivotal test of Bitcoin's ability to sustain its security model without relying on block rewards. Until then, vigilance and strategic foresight will be the cornerstones of a resilient investment approach.