Despite concerns that Bitcoin ordinal numbers will clog the network, there is little evidence that inscriptions are taking up block space for high-value Bitcoin (BTC) currency transfers.
“There is little evidence that inscriptions are replacing currency transfers,” on-chain analytics firm Glassnode explained in a September 25 report.
The company explains that this may be because Inscription users tend to set lower rates, indicating a willingness to wait longer for confirmations.
“Inscription appears to be purchasing and consuming the cheapest available block space and is easily replaced by more urgent currency transfers.”
Bitcoin Ordinal was launched in February 2023 and has since accounted for the largest share of network activity in terms of daily transaction counts.
However, Glassnode noted that this is not necessarily reflected in its share of mining fees, with Inscription accounting for only around 20% of Bitcoin transaction fees.
More inscriptions mean more revenue—but there’s a problem
While Inscription has enhanced baseload demand for block space and increased miner fees, Glassnode said Bitcoin’s hash rate has also increased by 50% since February.
According to Glassnode, this has led to increased competition for miners looking to generate income:
“With the fierce competition among miners and the approaching halving event, miners are likely to be on the verge of revenue pressure, and unless the price of Bitcoin rises in the short term, their profitability will be tested.”
Bitcoin is currently priced at $26,216, but many industry experts expect some appreciation ahead of the Bitcoin halving event scheduled for April 2024.
related: Bitcoin ordinal creator Casey Rodarmor proposes BRC-20 replacement “Rune”
Currently, most inscriptions are the result of the BRC-20 token, which was launched a month after Casey Rodamor launched the Bitcoin Ordinals protocol in February.
On September 25, Rodarmor promoted “Runes” as a potential replacement for BRC-20, suggesting that UTXO-based fungible token protocols would not leave so much “junk” unspent transaction output on the Bitcoin network.
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