Since April, daily transaction fees on the Bitcoin network have plummeted by over 80%, according to Galaxy Digital. By August 2025, nearly 15% of blocks are being mined for “free,” which means they’re processed with minimal or no transaction fees, often at just one satoshi per virtual byte or less.
This is beneficial for users, allowing them to enjoy inexpensive Bitcoin (BTC) transactions. However, it poses a significant challenge for miners and, consequently, the long-term security of the network.
Bitcoin’s incentive structure is built on compensating miners through block rewards and transaction fees. However, with the April 2024 halving reducing rewards to 3.125 BTC per block, miners are increasingly reliant on the fee market, which is shrinking.
“As block rewards diminish, more reliance is placed on transaction fees,” stated Pierre Samaties, chief business officer at the Dfinity Foundation, in an interview with Cointelegraph. “If usage fails to increase, that foundational support weakens, and guarantees are compromised. Sustained throughput is vital for the system’s resilience.”
Related: Bitcoin 2025 builders predict DeFi will unseat traditional finance
Bitcoin onchain activity declines
Bitcoin’s onchain activity has significantly slowed down since the fall of non-monetary trends like Ordinals and Runes. Galaxy’s report highlights that OP_RETURN transactions, which surged during the 2024 Ordinals boom, now make up only 20% of daily volume, down from over 60% at their peak.
Meanwhile, competing layer 1s like Solana are gaining popularity for high-frequency applications, including memecoins and NFTs. Additionally, the growth of spot Bitcoin ETFs, now holding over 1.3 million BTC, has diverted more BTC volume offchain, limiting the transactions that could generate fees.
Bitcoin’s fee market is inherently elastic, meaning fees increase when demand spikes and decrease when activity wanes. However, if demand keeps diminishing, miners might find themselves with inadequate incentive to secure the network. Galaxy noted that nearly 50% of recent blocks haven’t been filled, and mempool activity remains sluggish.
In light of this situation, a new opportunity is emerging in the form of BTCfi, Bitcoin-native DeFi. Unlike DeFi on Ethereum (ETH) or Solana (SOL), which utilize smart contracts on those chains, BTCfi employs Bitcoin as the base asset, developing financial applications like lending, trading, and yield generation on layers or protocols that interact directly with the Bitcoin network.
“Every BTCfi operation necessitates the movement of Bitcoin,” Samaties elaborated. “Movement drives computation, which consumes block space, and that space incurs costs.” In other words, if BTCfi expands, so does onchain activity and fee revenue.
Related: The future of DeFi isn’t on Ethereum — it’s on Bitcoin
From digital gold to financial primitive
Samaties remarked that Bitcoin has often been regarded as “digital gold,” serving as a store of value more than a practical asset. However, he envisions it transitioning into something more fundamental: a financial primitive.
“A financial primitive functions as a building block for developers to create flows, tools, and logic,” he stated. “In that capacity, Bitcoin evolves from merely an asset to hold into a programmable component within broader financial systems.”
Julian Mezger, chief marketing officer of Liquidium, also mentioned that infrastructure advancements are paving the way for change. “The last five years have transformed Bitcoin’s infrastructure from a basic settlement layer into a multi-layered ecosystem,” he stated. “We are currently witnessing the foundations for true Bitcoin-native DeFi being established.”
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