Since April, daily transaction fees on the Bitcoin network have plummeted by over 80%, as reported by Galaxy Digital. As of August 2025, around 15% of blocks are being mined “for free,” indicating they incur minimal or no transaction fees—just one satoshi per virtual byte or less.
While the lower Bitcoin (BTC) transaction fees are advantageous for users, they pose a challenge to miners’ revenue, raising concerns about the long-term sustainability of the network’s security model.
Bitcoin’s incentive structure is predicated 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 currently shrinking.
“As block rewards diminish, more reliance is placed on transaction fees,” stated Pierre Samaties, chief business officer at the Dfinity Foundation, in a conversation with Cointelegraph. “If usage remains stagnant, that foundation weakens, and guarantees diminish. Sustained throughput is crucial for the system to maintain its integrity.”
Related: Bitcoin 2025 builders predict DeFi will unseat traditional finance
Decline in Bitcoin on-chain activity
Bitcoin’s on-chain activity has significantly decreased following the downturn of non-monetary trends such as Ordinals and Runes. Galaxy’s report indicates that OP_RETURN transactions, which were heavily utilized during the 2024 Ordinals surge, now represent only 20% of daily volume, down from over 60% at their peak.
Meanwhile, alternative layer 1s like Solana are gaining popularity for high-frequency use cases, including memecoins and NFTs. Additionally, the advent of spot Bitcoin ETFs, which currently hold over 1.3 million BTC, has shifted more BTC volume off-chain, limiting the activity that would typically produce fees.
The fee market for Bitcoin is designed to be elastic, meaning fees increase when demand spikes and decrease during slow periods. However, if demand continues to decline, miners might not have enough incentive to secure the network. Galaxy noted that nearly 50% of recent blocks have not reached full capacity, and mempool activity remains sluggish.
Amid these challenges, a new possibility is emerging in the form of BTCfi, Bitcoin-native DeFi. Unlike DeFi on Ethereum or Solana that utilizes smart contracts, BTCfi employs Bitcoin as its foundational asset while developing financial applications such as lending, trading, and yield generation on layers or protocols that directly engage with the Bitcoin network.
“Every BTCfi action necessitates the transfer of Bitcoin,” Samaties elaborated. “Movement generates computation, computation occupies block space, and that space incurs costs.” In essence, growth in BTCfi would lead to increased on-chain activity and fee revenue.
Related: The future of DeFi isn’t on Ethereum — it’s on Bitcoin
Transforming from digital gold to financial primitive
Samaties emphasized that Bitcoin has traditionally been perceived as “digital gold,” a means of storing value more so than a functional asset. However, he envisions its evolution into something more fundamental: a financial primitive.
“A financial primitive serves as a building block that developers can utilize to create flows, tools, and logic,” he explained. “In this capacity, Bitcoin transcends being merely an asset to hold; it becomes a programmable element within expansive financial systems.”
Julian Mezger, chief marketing officer of Liquidium, also pointed out that advancements in infrastructure are paving the way for transformation. “The last five years have evolved Bitcoin’s infrastructure from a straightforward settlement layer into a multifaceted ecosystem,” he noted. “We are currently witnessing the groundwork for genuine Bitcoin-native DeFi being established.”
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