Bitcoin’s blockchain was flooded with volume over the weekend by transactions involving so-called “BRC-20” Ordinals – an emergent standard for issuing fungible tokens on Bitcoin.
The surge caused network fees to skyrocket to the point where transaction fee revenue for miners briefly surpassed the natural block subsidy for the first time since 2017.
Meme Tokens on Bitcoin
According to data from Dune Analytics, over 3.7 million BRC-20 Ordinals transactions have already occurred, versus just 631,630 non-BRC-20 Ordinals transactions.
A separate dashboard shows that over 4.7 million Ordinals inscriptions are now on Bitcoin, most of which appeared within the past two weeks alone. This indicates that much of the recent activity isn’t so much related to Ordinals NFTs as in early February, but to new fungible assets created by the BRC-20 standard.
BRC-20 is a “fun experimental standard demonstrating that you can create off-chain balance states with inscriptions,” wrote Twitter author domodata on gitbook, when revealing the innovation on March 10th. “this is an extremely dynamic experiment, and I strongly discourage any financial decisions to be made on the basis of its design.”
The author added that the idea of issuing assets on Bitcoin is “not novel” and that Taro – a lightning network-based solution for Bitcoin asset issuance – is “unequivocally a better solution.”
Despite his personal reservations, BRC-20 hasn’t failed to pick up steam. Data from brc-20.io shows that the market cap for tokens of this standard has surpassed $720 million and that their cumulative trading volume over the past 24 hours is over $132 million. Leading the pack is a token called “ordi,” followed by a Bitcoin-based version of the memecoin PEPE, and another called “meme.”
Transactions for these new memecoins are competing with ordinary BTC transfers for Bitcoin block space, creating a highly competitive fee market that makes the average transaction more expensive.
Data from ycharts shows that the average Bitcoin transaction fee has skyrocketed to $19.21 as of Monday, up from just $2.90 last week. Meanwhile, according to mempool.space, over 460,000 transactions are still awaiting confirmation within the blockchain.
The spike is almost certainly related to BRC-20 Ordinals, since Glassnode data indicates that Taproot-related transactions have shot up to 75% of all on-chain transactions, as opposed to just 1.5% at the start of the year.
The congested network makes transactions with Bitcoin more expensive and slow, but has created a massive boost to miner revenue in recent days. In fact, at block 788695, the associated miner netted 6.7 BTC in fees, which is larger than the consistent 6.25 BTC reward that comes attached to each block. The last time a flip of this kind occurred was in 2017.
Many in the Bitcoin community are enthusiastic that BRC-20 tokens are driving up fees in this manner, as it means that Bitcoin will boast a profitable fee market with mining incentives even after the block subsidy dwindles to near zero over the coming decades.
In the last ~ 20 minutes, there were 2 more blocks found by miners that contained transaction fees greater than the block subsidy.
Coins are moving from degenerate memecoin gamblers to #Bitcoin miners.
— Joe Burnett ()³ (@IIICapital) May 8, 2023
Others, however, view the development as a denial of service attack on Bitcoin, making transactions unfeasible for less wealthy populations in developing countries.
“Nodes can always decide to invalidate blocks by miners that include transactions they don’t consider valid,” suggested Bull Bitcoin CEO and Ordinals critic Francis Pouliot over Twitter. “Last resort and could be messy but it’s always possible.”
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