Bitcoin Inscriptions Bring Fee Revenue To Miners
Bitcoin Inscriptions Bring Fee Revenue To Miners
The mempool has remained consistently backlogged since the addition of Bitcoin inscriptions. Fee markets have gotten more competitive as the protocol approaches one million inscriptions.
Relevant Past Articles:
All Eyes On Ordinals: Addressing Bitcoin Decentralization & Block Space Concerns
State Of The Mining Industry: Public Miners Outperform Bitcoin
Earlier Than You Think: An Objective Look At Bitcoin Adoption
Bitcoin Inscriptions Bring Fee Revenue To Miners
It’s been over a month since we last wrote an update about Bitcoin ordinals and inscriptions. At that time, there were around 160,000 inscriptions and the protocol had been released to the public for roughly one month.
Now, another month has passed and we are approaching the one-millionth inscription, demonstrating just how quickly this new experiment has gained traction. In about the same amount of time that the first 160,000 ordinals were inscribed on Bitcoin, another 800,000 have been inscribed.
When we wrote our first article about Bitcoin ordinals on February 7, the focus was predominantly on the question of how transaction fees would be impacted by the massive influx of these new inscription transactions that were larger than typical monetary transactions due to the added data of images, text, applications and more.
In “Fee Market Competition: Bitcoin Ordinals And Inscriptions,” we wrote, “[P]ending transactions have continued to fill up the Bitcoin mempool, but the fee rate still hasn’t adjusted to match this demand.” The fees to get included in the next block were 3 sat/vByte.
Since then, there were extended periods where fees were higher than average, notably in late March when NFT enthusiasts were racing to inscribe the 10,000 Apes from Bored Ape Yacht Club onto Bitcoin. These larger image sizes being inscribed raised fees into the 20-40 sat/vByte range.
Source: Johoe’s Bitcoin Mempool Statistics
In conjunction with the ordinals craze, Bitcoin’s hash rate continued to increase at an impressive clip, which we covered in “State Of The Mining Industry: Bitcoin Hash Rate On The Move.” Blocks were regularly being found faster than 10 minutes on average, so the difficulty kept increasing to bring the average time to 10 minutes between blocks.
“This rapid rate of mining blocks has allowed for some of the inscription transactions with lower fee rates to be mined because blocks were getting mined faster than new transactions were being broadcast to the network. We are interested to observe the mempool backlog after this next difficulty adjustment in two or three days.” — All Eyes On Ordinals: Addressing Bitcoin Decentralization & Block Space Concerns
Difficulty has only increased since the addition of inscriptions, with the exception of one tiny decrease of 0.49% in mid-February.
Source: BTC.com
Bitcoin 2023 ticket prices increase TONIGHT at midnight! Lock in your ticket & join the Bitcoin Magazine PRO team at the Bitcoin event of the year. Paid subscribers get 15% off tickets and everyone can use code “BMPRO” for 10% OFF.
After the most recent difficulty adjustment on April 6, blocks have been coming in a little slower, which has contributed to a slight increase in fees, but at the time of writing, the median fee to get in the next block was only 8 sat/vByte, even with over 100 blocks worth of transactions waiting to get confirmed. Though yesterday’s difficulty adjustment is a factor in a marginally increased fee, the depth of the mempool is mostly due to the sheer number of inscriptions and transactions waiting to get confirmed on-chain.
Source: Mempool.space
Historically, fees reached their highest levels in December 2017, at 120 sat/vByte — which was only a few months after SegWit was activated and had low adoption rates at the time. Before SegWit, transaction fees were determined by transaction size. SegWit introduced the concept of block weight, changing the fees to be charged by weight unit instead of transaction size. This change reduced transaction fees overall. Incidentally, SegWit is the soft fork that allows for inscriptions to receive a slight discount because the non-monetary data is included in the witness data.
The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:
What’s going on in the Bitcoin mempool. ⏰
Miner revenue from Ordinal transaction fees. 💰
Updates on Bitcoin’s decentralization. ⚛️
Keep reading with a 7-day free trial
Subscribe to