Author: Tanay Ved Source: Coin Metrics Translation: Shan Oppa, Golden Finance

•After the halving, miners' income has stabilized, but transaction fees are still low, which puts pressure on long-term incentives. Mining companies continue to adapt to the environment, invest in efficient hardware and utilize renewable energy.

•Bitmain ASIC devices occupy the main share of Bitcoin network computing power, causing concerns about supply chain risks and geopolitical interference.

•Bitcoin is gradually evolving into a store of value, but efforts to expand its transactional uses through methods such as Layer-2 solutions continue.

•As block rewards decrease, maintaining miner incentives may require higher value transactions and promote block space demand through competition to generate substantial transaction fee income.

Nearly a year since Bitcoin's fourth halving, miners are undergoing an adaptation period to deal with reduced block rewards, narrowing profit margins and changes in operational methods. In this article, we will update the Bitcoin mining ecosystem, including miner income, exchange capital flows, and ASIC hardware distribution. At the same time, we explore the current usage of Bitcoin – whether it is used as a medium of exchange or a store of value – and the impact this has on miner incentives and long-term sustainability of the network.

Miner income and capital flow

In the fourth quarter of 2024, total miners' income (including transaction fees and new block rewards) reached US$3.7 billion, an increase of 42% from the third quarter of 2024. In the third quarter, miners faced challenges of halving block rewards, sluggish Bitcoin prices and rising energy costs, and were forced to improve mining efficiency.

As of the first quarter of 2025, the total miner's revenue was approximately US$3.6 billion, of which transaction fees accounted for only 1.33%, and the 30-day computing power average has risen to 807 EH/s.

Miners' capital flow strategies are constantly adjusting. Data shows that miners transfer money directly to the exchange 0-hop Inflows remained basically stable, but occasionally large sell-offs indicate that mining companies are conducting stable fund management. The gradual increase in 1-hop inflows (miners transfer money to exchanges through intermediate addresses) may reflect the continued selling pressure of smaller miners or mining pool members.

Miner strategy evolution

Well-funded miners are more able to cope with the decline in revenue from the halving, and are adapting, such as upgrading to more energy-efficient ASIC equipment to improve mining efficiency per unit of electricity. Migrate to areas with lower energy costs, such as wind farms in Texas, or areas with underutilized energy such as Africa and Latin America to reduce operating costs. With diversified development, some mining companies have begun to get involved in AI data center hosting business to expand their revenue sources. For example, Core Scientific promises to provide 200 megawatts of computing power to host CoreWeave’s AI computing tasks. This shows that mining companies are transforming existing infrastructure into high-performance computing centers to increase profitability per unit of computing power.

Bitmain's hardware dominance and geopolitical impact

Although the geographical distribution of Bitcoin mining and the computing power distribution of mining pools are crucial to network risk resistance, the supply of ASIC hardware is also a factor that cannot be ignored. While economic incentives and energy costs drive miners to disperse around the world, the geographic environment presents additional challenges to hardware supply chains.

Based on the matching analysis of Nonce model and known ASIC devices, we estimate that mining machines produced by Bitmain (such as S19, S19j Pro, S19 XP) currently account for 59% to 76% of Bitcoin network computing power. The data is based on multiple levels of calculation, including the minimum estimate, adjusted data, and a fully processed data set.

Bitmain dominates the Bitcoin mining hardware market, and this dependence on a single manufacturer still has potential risks even in the case of distributed supply chains. Because Bitmain is headquartered, its market dominance highlights the impact of geopolitical factors on mining stability. For example:

• At the beginning of 2025, many American miners encountered delays in delivery of Bitmain mining machines due to strict customs reviews and new tariffs.

• Although these delays have varying degrees of impact, they highlight the possible frictions that the geographical environment may bring to the global mining industry and may reshape the industry structure.

As mining competition intensifies and transaction fee income increases, understanding the actual usage of Bitcoin can help evaluate its network sustainability and miner incentive mechanisms. Although Bitcoin’s initial goal was to become a “peer-to-peer electronic cash system,” its uses are gradually shifting towards global store of value and reserve assets.

Lightning Network and Bitcoin Layer-2 Economy

In order to improve the transaction function of Bitcoin and to cope with scalability restrictions and unstable transaction fees, second-layer solutions such as Lightning Network came into being. Lightning Network creates off-chain payment channels between users to achieve nearly instant and low-cost transactions, and only returns to the Bitcoin main network for settlement when the channel is closed.

Recently, the number of open lightning channels has dropped to about 52,700, but the total channel value remains between 4,500-5,000 BTC. This shows that despite the decrease in the number of channels, the network can maintain the same flow of value, which may be due to improved routing efficiency, channel consolidation, and growth of private channels.

In addition, Bitcoin Rollup and sidechains such as Stacks, Botanix are under development to increase scalability and transaction activity, and ultimately drive the growth of Bitcoin transaction fee revenue. These solutions hope to improve their usefulness while ensuring the security of the Bitcoin main chain by introducing smart contracts, speeding up transaction speeds and expanding new use cases.

It is worth noting that low-value transactions on the Bitcoin network have increased. Transactions with a value of less than $100 currently account for about 60%, and even reach 80% in some time periods in 2024. Although the number of large transactions of $100,000-1 million has also increased, their share of overall transactions has declined relatively.

At present, Bitcoin blocks have been continuously filled to the upper limit of 4MB, although the memory pool size and transaction number are relatively low. This indicates that the block space is mainly filled with low value, low fee transactions, and less competition has led to the average transaction fee remaining low, only briefly rising when Ordinals inscriptions and Runes demand surges. In the future, if high value or time-sensitive transaction participation increases, it may enhance transaction fee income, thereby supporting miner incentives and compensating for the impact of reduced block rewards.

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Bitcoin as a store of value and reserve asset

Although Bitcoin's trading function is still being optimized, its role as The role of "store of value" is becoming increasingly obvious. Its scarcity and predictable issuance mechanism have earned it the title of "digital gold". This trend has accelerated in the past few years, with the rising holdings of institutional investors, public offering companies, ETFs and even tier entities, and these entities currently hold more than 14% of the Bitcoin supply.

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On-chain data also supports the transition from Bitcoin to long-term holding assets. The liquidity of Bitcoin supply declines, that is, the reduction in the ratio of adjusted transfers to current supply, suggesting that BTC is more inclined to be held for a long time rather than frequently traded.

In addition, HODL Waves (Bitcoin Holding Time Distribution) shows that the proportion of Bitcoin supply that has been held for 1 year or more has risen to 63%, and this data continues to grow, reflecting that Bitcoin is evolving into a long-term reserve asset.

As miners adapt to the reality of reduced block rewards, they are optimizing their operations through hardware upgrades, geographical migration and diversified businesses. At the same time, the way Bitcoin is used is also evolving: low-value transactions and Layer-2 activities are growing, while long-term holdings are increasingly dominant, further consolidating their role as a store of value tool.

How to balance Bitcoin's trading capabilities with The stored value attribute will become the key to maintaining the long-term healthy development of the network and the sustainability of the security economic model in the future.