Decoding the reasons for the high traffic on the Bitcoin network

The 2023 bull run has resulted in a surge in activity on the Bitcoin chain. The number of daily transactions and the number of unique active addresses has grown steadily over the past 4 months.

Blockchain analytics firm CryptoQuant owns exhibit The Bitcoin Network Activity Index captures the growing activity on-chain. The index looks at key metrics such as transactions, addresses, and block space demand.

Interestingly, as highlighted by CryptoQuant CEO Ki Young Ju, the main reason for the increase in network traffic is transactions from multiple Taproot addresses.


Source: CryptoQuant

Bitcoin reshape the web

Until 2023, Bitcoin’s reputation will be limited to being a peer-to-peer (P2P) payment network with little practical use beyond settling transactions on-chain.

However, with the Taproot upgrade, Bitcoin began to position itself like other traditional layer 1 blockchains, allowing on-chain smart contract deployment and minting of NFT Ordinals.

According to data scientists at analytics firms glass nodeTaproot transactions account for more than 37% of the Bitcoin network spending output. The need for Taproot is also reflected through adoption and usage metrics.

Data shows that on May 1, 60% of Bitcoin transactions used Taproot, a record high.


Source: Glassnode

Another notable trend is the increasing use of textual inscriptions over pictorial inscriptions in Taproot transactions. In fact, these inscriptions account for more than 50% of all transactions on the Bitcoin network.

Taproot is an upgrade that improves Bitcoin privacy, scalability, and security. It introduces new signature schemes and flexible transaction structures to make transactions more efficient and cheaper.

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Miners earn huge transaction fees due to increased network traffic. Users are willing to pay more to quickly verify their transactions. On May 3, the Bitcoin network recorded $3.5 million in transaction fees, a two-year high.


Source: Glassnode

As a result, ordinals account for a significant portion of total fees paid to miners, averaging close to 21% over the past week, according to the dashboard. dune show.

The crypto community has many different stances on Ordinals, especially the idea of ​​Bitcoin smart contracts. Naysayers object to this non-financial use case because it clogs the network and increases on-chain fees.

At the time of writing, BTC was trading at $29,006, down 0.12% over the past 24 hours, according to data from CoinMarketCap.

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Ming Ying

According to AMBCrypto

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