Galaxy Digital Warning: Bitcoin Faces Risk of 'Settlement Layer Without Settlement'
Notable cryptocurrency asset management firm Galaxy Digital has recently released a report warning about the long-term sustainability of the Bitcoin network.
The report points out that Bitcoin is facing structural challenges that may degrade from an active trading network to a 'settlement layer with no actual settlement activities.' This risk primarily stems from the continuous shrinkage of on-chain activity and the sharp decline in transaction fee revenue.
Since the fourth halving in 2024, Bitcoin block rewards have decreased to 3.125 BTC, but transaction fee income has failed to fill the revenue gap for miners.
Data shows that Bitcoin's daily transaction fees have dropped to their lowest level since 2011, with about 15% of blocks becoming 'empty blocks' and nearly half of blocks failing to reach maximum weight, all indicating a severe lack of on-chain demand.
Furthermore, since April 2024, the daily average fee for transactions has plummeted over 80%, partly due to the decline of non-monetary use case activities such as Ordinals and Runes.
The core factor causing this situation is the migration of Bitcoin ecosystem activities. On one hand, spot Bitcoin ETFs hold approximately 1.3 million BTC, accounting for nearly 6.5% of the circulating supply, and these assets are locked in custodial accounts, participating little in on-chain transactions, thus generating no fees;
On the other hand, speculative activities such as NFTs and meme coins have shifted to low-cost public chains like Solana, while payments and microtransactions have been captured by Layer 2 solutions like Lightning, further weakening mainnet demand.
Additionally, the share of OP_RETURN transactions has dropped from 40-60% during the Runes craze to the current 20%, which, while alleviating network congestion, has also reduced sources of fees.
Meanwhile, the deterioration of miners' revenue structure directly threatens the security of the Bitcoin network. The report emphasizes that if transaction fees continue to lag, miners may be forced to shut down, leading to a reduction in network hash power and increasing the risk of a 51% attack.
As Galaxy researcher Alex Thorn points out, a security model that solely relies on block reward subsidies is difficult to sustain, especially when off-chain 'paper bitcoins' (like ETF shares) become mainstream.
In summary, Bitcoin is at a crossroads in its development, urgently needing to find a new balance between the value-preserving properties of 'digital gold' and the transactional functionality of a 'settlement layer'.
