The Bitcoin network is experiencing significant changes due to the increasing popularity of BRC-20 tokens, a new Bitcoin blockchain-based fungible token standard inspired by Ethereum’s ERC-20 tokens. Developed and deployed by a pseudonymous Twitter user named Domo just over a month ago, the BRC-20 standard uses the Bitcoin-based Ordinals protocol and inscriptions for token contracts, token minting, and token transfers.
Despite being relatively new, BRC-20 tokens already account for over 60% of all transaction activity on the Bitcoin blockchain, while paying 42.8% of all fees. This surge in BRC-20-related activity coincides with an increase in overall Bitcoin transactions and a sharp rise in Bitcoin transaction fees. The average transaction fee recently reached over $30, making it the highest in three years.
However, the growing interest in BRC-20 tokens and the corresponding spike in transaction fees come at a cost. Although daily transaction numbers are increasing, other metrics of network activity are declining. The number of active addresses on a daily basis is nearing a two-year low, while the number of new addresses is approaching its lowest level this year. Higher transaction fees are likely discouraging demand from new and existing Bitcoin network users.
On the other hand, the surge in fees benefits Bitcoin miners, who typically rely on the issuance of new Bitcoin for funding. Transaction fees usually make up a small portion of miner income, but the Bitcoin Fee Ratio Multiple has been falling sharply in recent days, indicating a more significant contribution from fees. A stronger miner network could lead to a more secure and robust Bitcoin network in the long run, which is a positive development.
The deployment of the Ordinals protocol on the Bitcoin blockchain last year and the recent rise in popularity of the BRC-20 token standard signifies a shift in perception of the potential uses for the Bitcoin blockchain. Previously seen as a static crypto blockchain serving solely as a digital currency ledger, these innovations could change the Bitcoin blockchain’s image to more closely resemble a smart-contract-enabled chain.
Whether this will ultimately alter Bitcoin’s essential value proposition from being “digital gold” remains to be seen. In the short term, the increase in transaction fees and events such as Binance halting Bitcoin withdrawals have impacted Bitcoin sentiment negatively. Some experts predict that Bitcoin may retest key support levels in the mid-$25,000s if it loses technical momentum and falls below support around the $26,500-$27,000 range.
However, upcoming macro risk events, such as weaker-than-expected US inflation data, could boost sentiment and push Bitcoin back towards $30,000 if it leads to increased bets on Federal Reserve rate cuts later this year.
Source: Cryptonews
