The rise in popularity for Bitcoin Ordinals has significantly pushed up network activity and fees on the Bitcoin network.
According to data from CryptoFees, Bitcoin’s transaction fee surged to a two year high of $3.5 million on Wednesday evening.
Bitcoin’s fee capture has now surpassed that of decentralized exchange Uniswap, which stands and $2.32 million, and is second only to Ethereum which recorded $17.23 million in fees.
Industry watchers attribute this dramatic rise in fees to the adoption of BRC-20 (Bitcoin Request for Comment) tokens, which facilitate transfers of fungible tokens on the Bitcoin blockchain.
This new token standard was created on the Bitcoin Ordinals protocol as a “fun experiment” by Twitter user “@domodata” on March 8. Despite domodata warning that these tokens could be “worthless,” rapid adoption of BRC-20 soon followed and led to the rise of text-based inscriptions.
3/ BRC-20 Standard
The BRC-20 uses Inscriptions.
In the current format, it is specified in JSON and stored as text content type on Bitcoin Ordinals.
p=protocol (For identifying BRC-20 events)
op=type of events (deploy/transfer/mint)
tick=ticker (4 letter)
lim=limit per mint pic.twitter.com/U7xvptCMZD
— Tom Wan (@tomwanhh) May 2, 2023
Rafael Schultze-Kraft, co-founder of on-chain analytics firm Glassnode, noted that more than 50% of all transactions on the Bitcoin network are now associated with inscriptions using text. This is all while the number of transactions has been continuously increasing over the last few weeks, hitting a record high of 682,000 on May 1.
In fact, the increasing popularity of text-based inscriptions has led to an uptick in Bitcoin transactions that are utilizing the Taproot upgrade, a soft fork of the Bitcoin protocol implemented in 2021 to enhance the network’s privacy, scalability, and efficiency. Glassnode data shows that 60% of all Bitcoin transactions on May 1 used Taproot, representing a record high.
11/ Up to a third of all #Bitcoin fees paid to miners in the recent days can be attributed to BRC20 transactions.
Inscriptions dashboard: https://t.co/YKwAbthEXL
— Rafael Schultze-Kraft (@n3ocortex) May 4, 2023
Whether or not these inscriptions will continue to drive network activity, and with it transaction fees, on the Bitcoin network remains to be seen. For now, these high fee levels will likely be a welcome development for Bitcoin miners after a tumultuous few months at the end of 2022.