Bitcoin News Today: Bitcoin’s Fee Dilemma: Can BTCfi Spark a New Era of On-Chain Finance?

Daily Bitcoin transaction fees have plummeted by over 80% since April 2024, according to Galaxy Digital, a trend that has left nearly 15% of blocks mined with minimal or no fees. While reduced fees are beneficial for users, they have raised concerns about the long-term sustainability of Bitcoin’s mining ecosystem. Miners typically rely on both block rewards and transaction fees for compensation. However, following the April 2024 halving, block rewards have been cut to 3.125 BTC per block, intensifying the sector’s reliance on the fee market, which is now showing signs of decline.

The shrinking fee market has been exacerbated by reduced on-chain activity. Galaxy Digital reported that OP_RETURN transactions—once a major driver of on-chain traffic during the 2024 Ordinals and Runes boom—now account for just 20% of daily volume, compared to over 60% at their peak. At the same time, alternative layer 1 networks such as Solana are attracting more users for high-frequency applications like memecoins and NFTs. Additionally, the rise of spot Bitcoin ETFs, which now hold over 1.3 million BTC, has shifted a significant portion of BTC activity off-chain, further limiting fee generation [1].

The Bitcoin fee market is designed to be elastic, adjusting to demand. However, if network usage continues to decline, the base of fee revenue that supports miner incentives could shrink significantly. Galaxy noted that nearly 50% of recent blocks have been mined without being full, and mempool activity remains subdued. This trend, if prolonged, could weaken the economic incentives for miners to continue securing the network [1].

In response to these challenges, Bitcoin-native DeFi—commonly referred to as BTCfi—is emerging as a potential solution. Unlike DeFi platforms on Ethereum or Solana that rely on their native smart contracts, BTCfi leverages Bitcoin as the core asset while building financial applications like lending, trading, and yield generation through layers or protocols that interact directly with the Bitcoin network. Every BTCfi action involves moving Bitcoin, which in turn generates computational demand and block space utilization—both of which contribute to fee revenue [1].

The potential of BTCfi is underscored by recent growth in its total value locked (TVL). Bitcoin DeFi TVL surged by 2,000% in the past year, rising from $305 million at the start of 2024 to $6.5 billion in mid-2025. This growth is significant given that only 0.3% of Bitcoin’s total market cap is currently engaged in DeFi. By comparison, Ethereum has 30% of its supply active in DeFi, suggesting that if Bitcoin followed a similar trajectory, BTCfi could generate over $750 billion in TVL [2].

Bitcoin has historically functioned as a store of value, often likened to “digital gold.” However, some industry experts argue that its future lies in becoming a financial primitive—a foundational building block for developers to create complex financial systems. Infrastructure improvements, particularly in the form of hybrid chains, sidechains, and trust-minimized bridges, have enabled Bitcoin to evolve beyond its original design. Projects such as BOB, Rootstock, and Stacks are creating environments where Bitcoin can be used programmatically, enabling lending, staking, and other financial applications [2].

As BTCfi continues to develop, it is also drawing institutional interest. A survey by EY-Parthenon and Coinbase found that 83% of investors plan to increase their crypto holdings in 2025, with 24% currently exposed to DeFi. Although regulatory concerns remain a top priority for many, the trust-minimized nature of Bitcoin DeFi—rooted in Bitcoin’s security and finality—offers a compelling proposition for institutional adoption. If BTCfi continues to attract both retail and institutional capital, it could significantly enhance on-chain activity and, in turn, reinforce the Bitcoin network’s economic model [2].

Source:

[1] Bitcoin Fee Crisis Deepens: Can BTCfi Keep Miners Secure? (https://cointelegraph.com/news/bitcoin-fee-crisis-miners-btcfi-2025)

[2] What is Bitcoin DeFi (BTCFi) - BOB (https://www.gobob.xyz/blog/what-is-bitcoin-defi)