Bitcoin Sets New All Time High for Daily Transactions, Boosted by Ordinals.
Bitcoin is one of the most well known cryptocurrencies due to its first mover advantage. It is also listed on most, if not all, cryptocurrency exchanges. However, its dominance has been under threat for the past several years due to other layer-1 blockchains that host applications and have protocols for minting NFTs. Right away, it may maintain its dominance as a result of BTC ordinals. Today, we explore how Bitcoin NFT led to its recent all-time-high daily transactions.
Increase in daily transactions on the Bitcoin Network
The trading volume of Bitcoin Ordinals attained a new record on 30 April 2023 as the number of these NFTs reached 300,000. On the same day, the number of Bitcoin transactions attained a new record high for 2023, showing the impact the BTC Ordinals have on the Bitcoin network.
In a related move, on 1 May Glassnode, an on-chain analytics provider, said that the daily transactions on Bitcoin was heading towards a new all-time-high. This is because the daily transactions had already reached 348, 700, yet there were clear signs that it was still in an uptrend.
The last average daily peak level was in 2017 when it reached 379,000. Intotheblock, a firm that offers market intelligence and advanced DeFi tools, concurred with this statistics when it tweeted, “The 7-day average of daily Bitcoin transactions was at its highest this week since December 2017. The increasing number of daily transactions suggests growing active usage of the Bitcoin blockchain.”
In reality, however, the highest daily transaction on the Bitcoin blockchain reached 426,814 on 30 April. This figure, inclusive of transactions of Ordinals, represents a 70% increase since the beginning of the year.
The Glassnode data shows that 30% to 40% of these transactions are a result of Ordinal inscriptions. The other daily transactions come from monetary transactions on exchanges. Generally, the normal BTC transactions account for around 30%.
As a reminder, BTC Ordinals are non-fungible tokens which are created on the Bitcoin blockchain that mostly consist of text inscriptions. In other words, users can embed data on the Bitcoin blockchain, thereby creating digital artwork and meme tokens, among others.
Although Satoshi, the smallest units of Bitcoin, are fungible they become non-fungible if people assign numerical values or inscribe some texts on them. By 8 April there were more than one million Inscriptions on the Bitcoin blockchain.
Positive effects of Bitcoin Ordinals on the blockchain
So far, there has been a strong debate among crypto enthusiasts and followers whether or not Ordinal Inscriptions have brought more value to the Bitcoin network. The truth is that there are both negative and positive sides to that. Let’s first discuss the positive effects of Ordinals on the Bitcoin blockchain.
Grayscale, a cross asset manager, says that the creation of a technology that enables people to develop Ordinal Inscriptions on the Bitcoin blockchain presents a big opportunity for the greater adoption of the network than before. This has also helped to expel the notion that the blockchain is rigid.
The introduction of Ordinals enhances the security of the blockchain. In the past, analysts believed that the security of the network would decrease when all the coins are mined. This is because there would be very little incentive for the miners to continue participating on the blockchain.
As a result, the development of Ordinals means that the network will continue to generate revenue through fees to support the activities of the miners. This creates security of the blockchain throughout its lifetime.
Already, we can see that Ordinals are generating much revenue for the blockchain. Data on Dune Analytics shows that on May 5 alone BTC Ordinals generated 257 BTC in fees.
As observed, the total fees generated from Bitcoin Ordinals as of 5 April was 899.39 BTC. This shows that the Ordinals have the potential to generate much revenue for the Bitcoin blockchain.
Some analysts also believe that Ordinal Inscriptions have the potential to attract more users to the network as well as sparking more development on the blockchain. To this effect, Grayscale commented, “While legitimate concerns exist, we believe that ordinals have the potential to positively impact the Bitcoin network in the longer-term, attracting a new wave of enthusiastic users and developers to embrace the Bitcoin community.”
Similarly, a Twitter user with the username @LeonidasNFT, said, “As long as the value gained from minting BRC-20 tokens is higher than the value lost to the inscription fees, we will see fees on Bitcoin continue to climb.” By the way, Ordinals are in the form of BRC-20 tokens.
Leonidas added, “It indicates strong demand for Bitcoin’s block space, which is critical for the long-term success of the protocol. The days of only using Bitcoin to transfer BTC to your hardware wallet once every few years have come to an end.”
The views expressed by such users and analysts show that Bitcoin NFT has changed the perception people have on the network. Additionally, the Ordinals have created a new use case for the blockchain.
Negative effects of Bitcoin Ordinals on the blockchain
Currently, the Bitcoin and crypto community have not registered many concerns except that the Ordinal Inscriptions consume much space on the blockchain. The critics also say that congestion on the blockchain may also increase the network fees.
Bitcoin Price Outlook $29,000
By the end of April Bitcoin maintained a value of over $29,000 despite having short periods where it fluctuated below $28,000. For example, it dropped to around $27,000 when the market got the news that the United States government was planning to sell its Bitcoin holdings.
At the time of writing, the value of BTC is fluctuating slightly below $27,000 as indicated in The Graph below.
As you note, the price of BTC is fluctuating around $27,000. Its value dropped below $29,000 on 6 May and it is still hovering below that price.
The trading volume of BTC NFTs has been rising gradually since the beginning of the year. This has increased the revenue which the blockchain generates as well as its adoption. In the future, the Ordinal Inscriptions will become instrumental in maintaining the security of the network.