The cost of buying bitcoin (btc) is hitting record highs this week and, in a sense, so is the cost of moving it.
On-chain data shows that the price of the bitcoin blockspace has reached a new all-time high in terms of btc, largely due to the massive demand created by Ordinals transactions.
Record demand for bitcoin block space
Anita Posch, founder of bitcoin for Fairness highlighted the record cost in X, showing that transactions reached a cost of more than 350 satoshis per vByte (sat/vB) on Thursday.
A vByte is a measure of the weight of the block and transactions, where one vByte is equal to four units of weight. Each bitcoin block can store 4 million weight units of witness data in total, and the standard SegWit-based transaction weighs only 1 weight unit.
Mempool data shows that the weight of bitcoin's mempool (where not-yet-confirmed transactions are stored) reached a new high of 390 vMegabytes (vMB) on Tuesday. This is a sign of major congestion on the blockchain, meaning slower btc settlement times and more expensive transactions, destroying the viability of smaller payments on the chain.
“I stop adding users to the chain in Ghana, South Africa, etc. with these fees,” Posch wrote to X, noting that transactions at such costs are equivalent to “10% of the average income in many countries.”
bitcoin fees have spiked at various points this year during times of increasing activity for Ordinals, a protocol for issuing NFTs and tokens on the bitcoin blockchain. Unlike other blockchains, bitcoin NFTs store the image data of their tokens directly on the chain, resulting in sizable and expensive transactions.
Benefits for bitcoin miners
According bitcoin-ordinals-analysis” data-wpel-link=”external” target=”_blank”>Dune analysisRegular fees paid by users amounted to $1.9 million on Tuesday and another $854,000 on Wednesday. In total, related transactions have accumulated $148.4 million in fees to date.
Some Bitcoiners, including bitcoin Core developer Luke Dashjr, believe that Ordinals transactions constitute a form of network spam. Its newly launched bitcoin mining pool, OCEAN, has opted to filter Ordinals transactions to allow miners to “contribute to blocks full of real transactions.”
ethereum gas fees have also nearly doubled since last month following the introduction of Buterin Cards NFTs, reaching their highest level since May of this year.
Ordinals allowed bitcoin transaction fees to rival ethereum's last month, generating ~$52.6 million in fees between November 18 and 25, compared to ethereum's $61.5 million.
According Hash rate index, between 25% and 30% of rewards for bitcoin mining pools come solely from transaction fees over the three days, as opposed to miners' standard 6.25 btc block subsidy. The upcoming bitcoin “halving” in April will cut that subsidy in half.
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