Bitcoin NFTs, better known as Ordinals, have become almost inescapable of late, with over 89,000 sign-ups in existence. For the first time in Bitcoin’s 14-year history, the blockchain is being used for more than peer-to-peer transfers, but not everyone is satisfied. While a significant portion of Web3 is delighted with the way this new area of the NFT market is growing, others have raised concerns about the new technology behind this burgeoning sector.
Although opportunities abound as more users find it possible and desirable to move their collecting and trading efforts to Bitcoin, the blockchain itself could be suffering as a result. While the barrier to entry into the Ordinals ecosystem it keeps going down As popularity increases and more creators look to inscribe data into Bitcoin, network congestion has emerged as a potential symptom that Bitcoin NFTs could be creating on-chain stress.
Bitcoin blocks are booming
The new protocol ordinalsReleased by software engineer Casey Rodarmor on January 21, it allows users to log data directly on the blockchain, unlike NFTs on other chains, such as Ethereum, which often target off-chain data housed on a decentralized file storage system. That data can include smart contracts, which in turn enable the creation of NFTs. While this on-chain capability has led to a lot of fanfare as ordinals are called “true NFTs”, it also means that Bitcoin NFTs hold a significant place. batch from space.
Anecdotally, Bitcoin’s block storage capacity hasn’t been something to worry about because the chain has, until now, only been used for peer-to-peer monetary transactions. But as Ordinals continues to gain prominence, and NFT enthusiasts learn the ins and outs of signing up or find ways to get on board with the Ordinals ecosystem through developer tools, more usage has meant more traffic, and ultimately, led to network congestion.
To put it in perspective, while Bitcoin blocks (the sequential groups of transaction data that are packed together) can theoretically be up to 4MB in size, more often they cap out at 1-2MB. Some have even dictated 2 MB as a more realistic maximum size for Bitcoin blocks because a block size of 4 MB represents the absolute maximum size of a block of data that can be added to the blockchain.
However, according to glass nodesince the release of Ordinals, the upper range of the average Bitcoin block size it has grown from 1.5-2.0 MB to 3.0-3.5 MB in a matter of weeks. In fact, on February 1, Inscription 652, the first of the Taproot Wizards collection, made history as the largest block and transaction in the history of Bitcoin in 4 MB.
short term spikes
Ever since Ordinals came on the scene, mining large blocks became commonplace and necessary, leading to, as reported by Bloomberg, higher transaction fees on the Bitcoin blockchain. The day before the protocol was launched, transaction fees peaked at 3.28 percent. While on February 13 the rates reached a maximum of 5.68 percent. While this may seem like a concerning pattern, Glassnode reports that these are “short-lived spikes” and we have yet to see a significant increase.
Perhaps as a cause of this effect, Glassnode reports that the total number of Bitcoin wallet addresses holding assets (those with a non-zero balance) has reached a new all-time high of over 44 million. As the report points out, this demonstrates a short-term increase in usage of the Bitcoin network, with the primary source of this activity coming from new users and Ordinals data rather than coin volume.
While this increase in numbers has been welcomed by some Bitcoin maximalists who are very publicly embraced Ordinal’s burgeoning marketplace, others have raised concerns about the dwindling accessibility of blockchain. One Twitter user in particular, who goes by the name bitcoin is savingnoted that those in developing countries could be affected to a much greater degree for higher transaction fees than the US. A claim that seems to be bolstered by the fact that countries like Vietnam and the Philippines were found to have most important rates of cryptocurrency adoption in 2022, while the US and China maintained their status as Bitcoin mining powerhouses, accounting for about 30 and 60 percentrespectively, of all Bitcoin mining in 2022.
While surely only time will tell if short-term concerns like rising transaction fees become long-term concerns, it appears that, as with other NFT trends like PFPs and Open Editions, nothing You can stop the spread of Ordinals around the world. the NFT ecosystem. However, considering the environmental concerns raised in response to the early rise of Ethereum NFTs, Bitcoin NFTs will face a similar period of uncertainty and doubt.
