Bitcoin Ordinals Not Encroaching on BTC Blockspace, Despite Increased Network Activity
Summary:
Contrary to concerns, Bitcoin Ordinals are not significantly impacting blockspace for Bitcoin monetary transfers, says on-chain analytics firm Glassnode. Despite the Ordinals protocol accounting for most daily transactions since its launch in 2023, it only contributes to about 20% of Bitcoin transaction fees. Furthermore, while Bitcoin Ordinal inscriptions have increased base-load demand on the network, Bitcoin's hashrate has risen by a whopping 50% since February. This increase hints at intensified competition among miners vying for revenue fees, especially as the coin's halving event approaches in 2024. Casey Rodarmor, the creator of the protocol, recently proposed "Runes," a UTXO-based fungible token protocol, as an alternative to BRC-20s to reduce “junk” unspent transaction outputs in the Bitcoin network.
While there are worries that Bitcoin Ordinals might be congesting the network, there's no conspicuous indication that these inscriptions are detracting from the blockspace necessary for Bitcoin's (BTC) substantial monetary transfers. On-chain investigative company, Glassnode, clarified in a report shared on September 25, that there's virtually no confirmation that inscriptions are pushing out monetary transactions. This is presumably because those who use inscriptions generally prefer lower fees, showing a readiness for prolonged confirmation times. Glassnode's report states that these inscriptions appear to be claiming the most affordable available blockspace, and are easily pushed out by monetary exchanges requiring urgency.
Bitcoin Ordinals, launched in February 2023, have since been responsible for most of the network activities, especially in relation to daily transaction numbers. However, this hasn't translated proportionally into its portion of mining fees, with inscriptions only comprising about 20% of Bitcoin transaction fees, as noted by Glassnode.
More inscriptions mean increased revenue, albeit with a qualification. While inscriptions have fueled the base-load demand for blockspace and raised fees for miners, BTC's hashrate has equally risen by 50% since February. This has fostered stiffer competition among miners vying for the revenue from these fees, says Glassnode. With the intense competition among miners and a halving event on the horizon, it's likely that their profits are under threat. These miners may only remain viable if BTC prices raise in the short term.
At the present time, Bitcoin is being traded at $26,216. On the other hand, industry experts are anticipating a potential spike in the price as the Bitcoin halving event slated for April 2024 approaches.
Most inscriptions are currently stemming from BRC-20 tokens that were brought into existence a month following the launch of the Ordinals protocol on Bitcoin by Casey Rodamor in February. On September 25, Rodarmor proposed "Runes" as a potential alternative to BRC-20s, arguing that a UTXO-based fungible token protocol will result in less unspent transaction outputs, or "junk," prevalent in the Bitcoin network.
Published At
9/27/2023 5:25:35 AM
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