Bitcoin News Today: Bitcoin’s Fee Market Stagnation Threatens Network Security and Sustainability

Bitcoin’s fee market has experienced a significant decline, raising concerns about the long-term economic sustainability of the network and its role as a settlement layer. With the drop in non-monetary activities such as Ordinals and Runes since late 2024, on-chain usage has diminished sharply. This has led to an increase in blocks that are either “free” or nearly free, where the average fee paid is just one satoshi per virtual byte or less [4]. While this situation benefits users seeking low-cost transactions, it places additional strain on the mining ecosystem, which has already been affected by the 2024 halving [4].

The median daily transaction fee has fallen by over 80% since April 2024, and as of August 2025, approximately 15% of all blocks can be classified as “free blocks” [4]. In addition, nearly half of the blocks over the past few months have not reached the maximum weight capacity, indicating a lack of competition for blockspace and a thin mempool. This development has raised concerns among analysts, who view it as a potential threat to the network’s security and economic model [4]. Miners, who now receive only 3.125 BTC in block rewards post-halving, increasingly rely on transaction fees for revenue, yet the fee market has failed to compensate for the drop in block subsidies [4].

The decline in fees is attributed to a combination of factors, including the rise and subsequent decline of OP_RETURN transactions. These transactions, which allow data to be embedded in the blockchain without increasing the unspent transaction output (UTXO) set, accounted for a significant portion of daily activity during the peak of the Runes protocol adoption in 2024 [4]. At times, OP_RETURN transactions made up 40–60% of daily activity, but their share has since dropped to around 20% [4]. The evolution of OP_RETURN is particularly relevant given the upcoming Bitcoin Core v30 release, which will allow larger and multiple OP_RETURN outputs per transaction by default. While supporters argue that these outputs do not burden the UTXO set, critics warn they consume blockspace that could otherwise be used for monetary transactions, potentially leading to spam and sustainability concerns [4].

Another key factor behind the fee decline is the migration of activity away from Bitcoin’s base layer. Spot Bitcoin ETFs now hold approximately 1.3 million BTC, much of which remains static and does not generate on-chain activity. Simultaneously, speculative activities such as trading NFTs and memecoins have shifted to faster and cheaper Layer 1 blockchains like Solana [4]. This shift has further reduced demand for Bitcoin’s blockspace, compounding the pressure on fees. Galaxy Digital notes that as more volume moves to custodial solutions and alternative blockchains, the Bitcoin network risks becoming a settlement layer with insufficient settlement activity [4].

The distribution of unspent Bitcoin across different address formats also provides insight into long-term network dynamics. Over 1.5 million BTC are held in legacy P2PK addresses, which are considered vulnerable to quantum computing attacks due to the exposure of public keys on-chain. Meanwhile, P2WPKH (native SegWit) now holds the largest share of unspent BTC, reflecting the adoption of more secure and efficient address formats. P2TR (Taproot), introduced in 2021, is also growing in popularity, supporting advanced scripting use cases [4]. Galaxy Research plans to release a more detailed analysis on the implications of quantum computing for Bitcoin in the future [4].

In conclusion, Bitcoin’s fee market has entered a phase of stagnation, with implications for the network’s economic health and security. While low fees benefit users seeking inexpensive and fast transactions, the long-term sustainability of the network is uncertain. With block rewards already reduced to 3.125 BTC and fee revenue declining, miners face increasing exposure to fluctuations in demand. As more Bitcoin activity shifts to ETFs, custodial platforms, and faster alt-L1s, the core network risks becoming a settlement layer without sufficient settlement activity. This trend raises critical questions about the future of Bitcoin’s security model and its reliance on organic usage [4].

Source: [1] Bitcoin Average Transaction Fee - Real-Time & Historical ... (https://ycharts.com/indicators/bitcoin_average_transaction_fee?referrer=KM13492686) [2] How To Save Fees in Bitcoin Smart Contracts (https://www.sciencedirect.com/science/article/pii/S2096720925000922) [3] How to track and optimize Bitcoin transaction fees (https://crypto.news/how-to-track-and-optimize-bitcoin-transaction-fees/) [4] Bitcoin Fees Collapse: What Onchain Data Tells Us - Galaxy (https://www.galaxy.com/insights/research/bitcoin-onchain-fees-utxo) [5] Bitcoin Risks Becoming a Settlement Layer With Nothing to ... (https://cryptopotato.com/bitcoin-risks-becoming-a-settlement-layer-with-nothing-to-settle-galaxy-sounds-alarm/) [6] Behind the frequent new highs of BTC: What is the current ... (https://news.futunn.com/en/post/60910843/behind-the-frequent-new-highs-of-btc-what-is-the)