The latest wave of Bitcoin Ordinals inscriptions has led to a steep increase in transaction fees and a substantial backlog in the Bitcoin mempool, with some users anticipating that these elevated fees will persist. Bitcoin miners are the obvious main beneficiaries of current sky-high transaction fees, but many other longtime market participants have little time for complaints.
The average transaction fee on the Bitcoin network, as of December 17, has soared to nearly $40, according to BitInfoCharts. There is also a significant backlog in the Bitcoin mempool. The transaction queue extended over 372 blocks, equating to a delay of nearly 2.6 days, based on the network’s processing capacity of 144 blocks per day.
At one point, Bitcoin’s mempool reached 372 MvB (mega virtual bytes), surpassing the levels induced by the Ordinals or BRC-20 frenzy earlier this year and even exceeding the cycle peak periods in 2017 and 2021.
Certainly, the process of clearing the global queue of Bitcoin transactions is not that straightforward; transactions do not necessarily take 2.6 days to be confirmed. Users can speed up confirmations for time-sensitive transactions by paying higher fees to miners.
Miners are currently enjoying the best USD revenues in years. Until recently, their revenue primarily depended on the block reward, the 6.25 BTC per block created, with transaction fees contributing a mere 2% to the overall revenue. However, with the surging interest in NFTs and BRC-20s, transaction fees have become a much more significant part of miners’ earnings.
The fact that casual on-chain spending becomes unviable for many smaller investors is only further intensifying the ongoing debate within the Bitcoin community.
Some Bitcoin Core developers label Ordinals as a spam ‘bug’ only possible because of a ‘vulnerability,’ and hence should be fixed. Somehow, inscriptions have even been classified as cybersecurity risk in the U.S. National Vulnerability Database. They have already been filtered by the new @LukeDashjr’s Ocean Mining pool and its Bitcoin Knots node and wallet. Chances are, the future Bitcoin Core v27 upgrade might also filter them. However, the effectiveness and necessity of these methods to stop inscriptions are subjects of intense debate.
However, a recent Glassnode report reveals that despite the hype around inscriptions, most block space is still full of monetary transfers. The lead on-chain analyst from @Glassnode highlighted in TwiXter several counter-intuitive facts about inscriptions from this report:
“Inscriptions are: - Primarily tiny text files (order of mag > Images)- Around 50% of daily transactions- Less than 10% of block data size (bytes) Pay ~20% to 40% of fees”
“Monetary transfers still account for:- 90% of the block data footprint- 60% to 80% of the fees paid- Yet are 50% of the transactions”
Meanwhile, some prominent figures in the Bitcoin community suggest that transaction fees reaching double digits are just a preview of future trends. To mitigate these rising costs, they advocate for adopting layer-2 solutions such as Lightning Network, designed specifically to cater to mass adoption.
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