Monday, 27 March 2023

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Bitcoin miners already made nearly $600K from Ordinals’ NFT transactions

Bitcoin miners already made nearly $600K from Ordinals' NFT transactions

Bitcoin (BTC) miners have earned nearly $600,000 in two months from a new controversial NFT protocol called Ordinals that has triggered a surge in user activity.

What are Bitcoin Ordinals? 

Ordinals allow users to inscribe data in the form of images and other media types in newly mined blocks on the Bitcoin blockchain that’s otherwise largely used for peer-to-peer monetary transactions. 

Fee spent on inscribing Ordinal NFTs on the Bitcoin blockchain. Source: Dune Analytics

Since the launch of Ordinals in mid-December, however, users have inscribed nearly 74,000 NFTs into the Bitcoin blockchain, earning miners a cumulative $574,000 in BTC transaction fees to date, data from Dune Analytics shows.

These NFTs include “digital artifacts” stemming from the derivative projects of Ethereum’s CryptoPunks and Bored Ape Yacht Club collection in February.

Rising emand for Bitcoin block space

The Ordinals protocol was made possible by Segregated Witness (SegWit) and Taproot, Bitcoin’s network soft fork upgrades from 2017 and 2021, respectively.

Related: Ordinals protocol sparks debate over the place for NFTs in the Bitcoin ecosystem

For instance, the SegWit update effectively increased Bitcoin’s block capacity up to 4MB. 

Similarly, the Taproot update helps batch and verify multiple transactions together as long as their size does not exceed 4 MB. This feature allows the inscription of data such as images and videos in Bitcoin blocks.

Bitcoin Taproot adoption in recent weeks. Source: Dune Analytics

The advent of Ordinals has coincided with Bitcoin’s mean block size jumping from its typical average of 1.5-2MB to between 3 and 3.5MB in early February.

Bitcoin mean block size. Source: Glassnode

Simultaneously, the number of pending SegWit and non-SegWit blocks in the Bitcoin mempool has also increased significantly — the highest since the FTX collapse, as shown below.

The number of pending blocks in the Bitcoin Mempool. Source: Glassnode

On some occasions, Ordinals’ data has been comprising over 50% of Bitcoin block space, according to BitMEX Research.

“This describes a growth in the user base and an upwards pressure on…

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