Blockchain enthusiasts are often inundated with reports and speculations about the impact of new developments modifying the market dynamics. One such assumption tied to Bitcoin (BTC) Ordinals claims that they are pushing away monetary transfers and causing network congestion. Interestingly, a latest report from the analytics firm Glassnode finds only little proof to substantiate the displacement concerns commonly held in the crypto circle.
What do we know about these Ordinals or inscriptions, as they are interchangeably called? They are a method of registering digital content on the Bitcoin network: non-fungible tokens (NFTs) inscribed on satoshis, which are Bitcoin’s smallest fractions. Seen as “pocket fillers,” these inscriptions, making up 20% of block fees, leverage the least expensive available block space. Contrary to the displacement worries, inscriptions appear to coexist with other money transfers, given their lesser demands on space, reduced costs, and users’ preparedness to wait longer for confirmations.
Meanwhile, the mining sector is in a state of flux, trapped between the promise of additional revenue from an influx of Ordinals and the threat of a bear market. Notably, the metrics depicting transfer volumes in this dynamic ecosystem paint a different picture. While mean transfer volumes could be attributed to monetary transfer movements, the median may indicate the slow and steady presence of inscriptions.
Despite an increase in miners’ fees and a 50% rise in hash rate since the introduction of Ordinals, miners have seen their rewards shrink alarmingly. The disruption brought about by Ordinals could push Bitcoin miners to the verge of unprofitability, especially in light of the forthcoming halving event.
Another role Ordinals play is in reshaping on-chain transactions and the mempool, where unconfirmed BTC transactions temporarily reside. While the report acknowledges their part in filling the mempool, it contends that discrepancies in pending transactions demonstrate a smaller data footprint between February and May.
To sum things up, Ordinals on the Bitcoin network, widely perceived as a threat to high-value transactions, might not be so disruptive after all. They seem to be blending into the network, affecting mining profitability while infusing the mempool with more transactions bearing a smaller data footprint. Navigating these intricate relationships will require close monitoring of industry metrics and trends.
Source: Cryptonews
