According to the latest Glassnode data, the introduction of the Ordinals protocol has allowed the development of NFTs on Bitcoin to coincide with significant changes in mempool activity and transaction size.
Bitcoin ordinal what is that?
With Ordinals NFT, users can mint NFTs, also known as digital artifacts or data inscriptions, directly on the Bitcoin blockchain with all relevant assets such as images and videos.
Launched in January 2023, the Ordinals Protocol allows users to interact and exchange individual satoshi containing uniquely recorded data. This new method of creating NFTs on Bitcoin takes advantage of changes in the Bitcoin Taproot upgrade. Specifically, the upgrade allows entire NFTs to be placed directly on-chain, providing a new way to discover, transfer, and receive these tokens.
Combined with the U.S. Securities and Exchange Commission’s (SEC) decision to exempt Bitcoin from the “safety” classification, some experts say a bullish outlook is starting to emerge, which could have a positive impact on the entire cryptocurrency ecosystem.
quantitative analysis
According to recent Glassnode data, Ordinals have had a positive impact on Bitcoin. However, there are a few factors to consider regarding the state of the Bitcoin network. For example, the average transaction size increased by more than 100%, from 600 B (bytes) to 1100 B.
Average transfer size | Source: Glassnode
However, the graph below illustrates Ordinals transactions with low satoshi fees (purple is dominant).
Total Bitcoin mempool size for group transactions | Source: Glassnode
Since the FTX crash, the total transaction fee (USD) for waiting in mempools of different sizes (vByte) has increased, and records have increased the base fee from 1 to 4 satoshis. Congestion is worse in mempools, partly due to the increased space required to store Ordinals write data compared to standard transaction data. Additionally, Bitcoin usage rose during the FTX scandal as investors withdrew their coins from exchanges, which played a major role in the November spike.
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Total Bitcoin mempool fees by group | Source: Glassnode
Glassnode data shows that since the launch of Ordinals, Bitcoin’s average block size range has increased significantly, from 1.5-2.0 MB to 3.0-3.5 MB in a few weeks. Incremental evolution is not only related to images, but also to larger files stored as ordinals, such as audio and video.
It is worth noting that on February 1st, Inscription 652, the first work in the Taproot Wizards series, set a new record for the largest block and transaction in Bitcoin history, reaching a size of 4 MB. Apart from, Subscribe to 2042 Uploaded to the Ordinals network.
qualitative analysis
Glassnode suggests that while the Ordinals network has a significant impact on Bitcoin transaction hash size and cost, qualitatively this may be related to a broader crackdown on PoS.
Most other layer 1 cryptographic protocols (base layer blockchains) have their own native tokens built on PoS consensus, including Ethereum.
However, with the SEC’s crackdown on Kraken’s staking service in the US, it’s shown that only highly qualified retail investors can participate in network validation for such blockchains. . Investing in ETH and similar tokens appears to be the exclusive domain of institutional players, leading to many improvements in Ordinals.
As such, the Ordinals protocol has been hailed as a game changer for the Bitcoin blockchain. By creating an NFT on top of bitcoin, it’s giving the world’s most popular cryptocurrency a new purpose beyond just facilitating peer-to-peer transactions. This is especially important because Bitcoin’s mainstream appeal is said to be hampered by factors such as regulation of the banking system and its volatile price movements.
This is evidenced by the intense bullish activity that seems to be building around the Ordinals network, according to data from Glassnode.
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Ming Ying
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