November 8, 2023

Resurgence of Bitcoin Ordinals Trigger 6-Month High in Transaction Fees

Increased demand for new NFTs on the Bitcoin blockchain causes a six-month peak in transaction costs.

Transaction fees within the Bitcoin network have surged to a six-month high, reaching an average of almost $6. This surge in costs is attributed to the resurgence of Bitcoin Ordinals, a specific type of NFT, which is gaining popularity and occupying considerable space on the blockchain, consequently driving fees higher.

Bitcoin Average Transaction Fee (USD)

Bitcoin Ordinals is a numbering system specifically designed to assign a distinct number to each satoshi, which represents 1/100 million of a bitcoin. This system facilitates the tracking and transfer of individual units. Moreover, it enables the creation of unique digital assets on the Bitcoin blockchain.

It's crucial to note that Bitcoin Ordinals function as non-fungible tokens (NFTs) that directly store data on the blockchain. While these NFTs provide a means of creating unique digital assets, they also contribute to a substantial increase in transaction numbers for Bitcoin miners to process on-chain. This surge in transaction numbers can lead to congestion in the mempool, creating more competition for confirmations and resulting in increased transaction fees.

Introduced in January 2023, the Ordinals protocol has stirred varied opinions within the crypto community due to its impact on the blockchain's transaction load and its facilitation of unique asset creation.

The integration of data into Bitcoin's blockchain through Ordinals is causing congestion in the network's mempool. This congestion, in turn, results in pricier and slower transactions for all users.

Bitcoin mempool

Within a span of just a week, close to 1 million new Ordinals were generated, notably driven by active projects like BEES and HALV. The backlog in Bitcoin's mempool has swollen to over 135,000 pending transactions, a significant rise from the 30,000 recorded at the beginning of October.

This sudden surge benefits Bitcoin miners, as they witness an increase in fee-based earnings, constituting 8.5% of their total income — a proportion not seen since June.

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