Bitcoin Risks Becoming a Settlement Layer With Nothing to Settle: Galaxy Sounds Alarm

Bitcoin’s price market has entered an uncommon part, elevating questions concerning the destiny of the charges and their implications for the community’s financial safety. Because the decline in non-monetary exercise like Ordinals and Runes in late 2024, on-chain utilization has dropped sharply.

The end result has been a rising variety of blocks that clear at nearly no value to customers, which frequently averages simply 1 satoshi per digital byte or much less.

The place Did All of the Bitcoin Charges Go?

For these seeking to ship bitcoin shortly and cheaply, this atmosphere appears supreme. However the identical can’t be stated for miners, who depend on charges to complement the shrinking block subsidy after the 2024 halving. The collapse of price stress exposes a deeper vulnerability in Bitcoin’s long-term sustainability, based on the most recent observe shared by Galaxy Digital.

Median day by day charges have fallen greater than 80% since April 2024, and as of August 2025, almost 15% of all blocks could be labeled as “free blocks.” On the similar time, nearly half of the blocks in latest months haven’t reached most weight, which revealed an unusually skinny mempool and highlighted the absence of competitors for blockspace.

The disappearance of charges could be traced to a number of structural modifications. One is the dramatic surge and decline of OP_RETURN transactions, which spiked in the course of the peak of Runes adoption in 2024, and at occasions accounted for 40-60% of day by day exercise. Their retreat again to roughly 20% of transactions has launched congestion, thereby decreasing general charges. But OP_RETURN stays central to debate, particularly as Bitcoin Core’s upcoming v30 launch might permit bigger and a number of OP_RETURN outputs per transaction.

Supporters argue that as a result of these outputs are provably unspendable, they don’t improve the burden on the UTXO set. Critics, nonetheless, warn that they eat scarce blockspace that would in any other case be used for financial transactions. This has sparked issues about spam and sustainability.

One other issue behind weaker charges is the migration of exercise away from Bitcoin’s base layer altogether. Spot ETFs now maintain round 1.3 million BTC, locking up provide that hardly ever strikes on-chain and thereby lowering transaction demand. On the similar time, speculative use instances similar to NFTs and meme cash have shifted to sooner and cheaper alternate options like Solana, the place customers discover a smoother expertise in comparison with Bitcoin’s comparatively constrained atmosphere.

This displacement implies that transactions that after competed aggressively for inclusion in blocks at the moment are occurring elsewhere, additional undermining price income for miners.

Past speedy price pressures, Galaxy additionally examined the UTXO set to evaluate long-term safety dangers. The analysts discovered that tens of millions of cash stay in legacy codecs similar to P2PK and P2PKH, a few of that are inherently susceptible to quantum assaults as a result of uncovered public keys. Then again, adoption of P2WPKH has grown to dominate unspent balances, whereas Taproot continues to realize traction for superior use instances.

“Settlement Layer With out Settlement”

For now, the lull presents a window of low cost transactions, however the long-term image is “murkier” as a declining price market poses critical inquiries to the community safety.

Publish 2024, miners are left with 3.125 BTC in block rewards, and miner incentives are more and more uncovered to fluctuations in natural demand. However as BTC exercise shifts towards ETFs, custodial platforms, and sooner different L1s, Galaxy stated that the core community dangers turning into a “settlement layer with out ample settlement exercise.” As reliance on off-chain “paper Bitcoin” grows and costs dry up, Bitcoin’s long-term safety hinges on a stage of utilization that continues to be unsure.

“Payment volatility is nothing new, however Bitcoin does want actual causes to make use of the chain. “

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