Table of Contents
Ordinals Protocol Alters Dynamics, Prompting Questions About Usability and Security
- Recent data reveals Bitcoin’s transaction fees of $61 million closely rival Ethereum’s $61.5 million, marking a reversal of the traditional costlier network.
- The introduction of “ordinals,” a protocol for inscribing non-BTC tokens, challenges Ethereum’s historical advantages and leads to a surge in transaction fees.
- While high fees associated with ordinals NFTs raise concerns about block space efficiency, Bitcoin miners benefit significantly, with over 12% of rewards to FoundryUSA from transaction fees, averaging 0.77 BTC per block.
In a significant shift, Bitcoin has emerged as the leader in total transaction fees, surpassing Ethereum in a recent week. This change marks a departure from the long-standing trend of Ethereum holding the position of the costlier network. The implications of this reversal raise questions about the usability and long-term security of Bitcoin.
Recent data obtained through a post on X from IntoTheBlock and Glassnode for the week spanning November 18 to November 25 reveals a noteworthy development. Bitcoin’s transaction fees, totaling $61 million, now closely rival Ethereum’s fees, which amounted to approximately $61.5 million during the same period. This proximity starkly contrasts with historical data from November 2022, where Ethereum commanded $92.2 million in fees, leaving Bitcoin far behind at $12.5 million.
Also Read: Bitcoin Core Dev Urges Lightning Network Devs to “Wake Up” or Face New Attacks
The Role of “Ordinals” and Surge in Fees
The emergence of “ordinals” has played a pivotal role in reshaping the transaction fee landscape. Acting as a protocol for inscribing non-BTC tokens on the Bitcoin blockchain, ordinals challenge Ethereum’s historical advantages. This technology supports both fungible and non-fungible tokens, presenting a marked departure from the previous limitations of the Bitcoin network.
An in-depth analysis reveals a direct correlation between the volume of ordinals and the surge in transaction fees. In May 2023, as ordinals surpassed 40 million inscriptions, Bitcoin’s transaction fees skyrocketed to $124 million for the month. The impact is evident in the recent week, where the average BTC transaction fee surpassed that of Ethereum, reaching $12.96 compared to Ethereum’s $7.52.
Pros and Cons of High Fees and Bitcoin Miners’ Incentives
Minting ordinals NFTs, while innovative, comes with a cost. The embedding of image data directly into the Bitcoin blockchain makes these NFTs memory-intensive, limiting space for standard, lower-fee transactions. On the flip side, the high fees translate into increased profits for Bitcoin miners, offering a financial incentive to maintain network security.
High fees have proven lucrative for Bitcoin miners, with over 12% of rewards to the FoundryUSA mining pool this month stemming solely from transaction fees. This amounts to an average of 0.77 BTC per block. The data, sourced from Hashrate Index, underscores the financial motivation for miners to prioritize transaction validation and network security in the current fee-intensive environment.
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