Bitcoin Ordinals, including Ordinal inscriptions, Ordinal NFTs, and Bitcoin NFTs, have gained immense popularity within the Bitcoin community due to their numerous benefits. With over 12 million inscriptions made so far, these unique digital assets have revolutionized the Bitcoin ecosystem. However, recent trends indicate a decline in the creation of Bitcoin Ordinals, raising concerns within the community. In this article, we explore the three main challenges that have contributed to this drop in activity since April, which marked the peak of inscription numbers.
1. The Mystery of “Cursed” Inscriptions
The emergence of “cursed” inscriptions has become a topic of intrigue and concern. The Ordinal protocol assigns a number to each satoshi, the smallest unit of Bitcoin, as part of the inscription process. However, if a satoshi receives a negative identification number unintentionally or deliberately, the protocol fails to recognize it. Consequently, these “cursed” inscriptions remain forever on the Bitcoin network without being tradeable.
The situation persisted from April until June 6th, when the Ord update addressed this issue. Given that Ordinals are a relatively new development, encountering edge cases and loopholes is to be expected. As one of the technical members of the Ordinals team stated, the project is a long-term endeavor, and occasional setbacks are part of the journey.
2. Bitcoin’s Shift Away from Being a Pure P2P System
Bitcoin, once heralded as a pure peer-to-peer financial transaction network, is now grappling with similar issues that have plagued Ethereum for years. The advent of scammy memecoins, ****coins, and NFTs comprising monkey pictures has raised concerns within the Bitcoin community. Despite these challenges, Bitcoin has embraced various developments that have enabled the storage and trading of digital art on its blockchain. These developments include colored coins, the OP_Return function, Segwit upgrade, Taproot upgrade, and the Ordinals protocol.
While these additions have expanded Bitcoin’s capabilities and attracted a broader audience, they have also triggered debates among Bitcoin purists and maximalists. This faction insists on preserving the Bitcoin blockchain solely for P2P transactions, fearing the dilution of its original purpose.
2.1. Increased Transaction Fees
The inclusion of Bitcoin native JPEGs, videos, games, and memecoins on the blockchain has undoubtedly attracted more participants to the Bitcoin ecosystem. This influx has incentivized trading activities and consequently driven up the bidding competition for limited block space. As a result, miners have begun charging higher minimum fees to process Bitcoin transactions.
Since the introduction of Ordinal NFTs in March 2023, the total transaction fees have exhibited a steady upward trend, as shown in Figure 3. In May 2023, these fees even surpassed Bitcoin’s daily market price for the first time since 2017. Proponents argue that higher transaction fees enhance the security model of Bitcoin by incentivizing developers to fortify the network. However, critics, such as Mati Greenspan, founder of Quantum Economics, raise concerns about the adverse impact on countries like Nigeria and El Salvador, where the average transaction cost skyrocketed to $30 temporarily, impeding the dream of financial inclusion on Bitcoin.
While the average transaction fee has since reduced to $5 from the peak of $30 in May, it raises important questions about Bitcoin’s evolution beyond purely financial services.
2.2. Congestion and Overflows in the Bitcoin Blockchain
Increased interest in Bitcoin-related activities has resulted in congestion and longer waiting times for transactions. The average confirmation time, which denotes the duration for transactions to be included in a block, has been on the rise since late last year. Presently, the average confirmation time stands at approximately 25 hours, a stark contrast to the 30-minute timeframe observed a year ago.
Additionally, the number of transactions awaiting confirmation, as indicated by the mempool transaction count, has steadily increased from over 20,000 in November 2022 to nearly 150,000 at present, as shown in Figure 6. Moreover, the Bitcoin block space has expanded from 1.4MB in June 2022 to almost 1.8MB today, as illustrated in Figure 7. The finite capacity of each chain to include transactions, coupled with the bidding competition for block space, exacerbates the issues of higher transaction fees, longer waiting times, and heightened congestion.
Conclusion
The decline in Bitcoin Ordinal activity since April can be attributed to several challenges faced by the Bitcoin community. The presence of “cursed” inscriptions and the transition of Bitcoin away from its original peer-to-peer vision have disrupted the once seamless ecosystem. Additionally, the rise in transaction fees and the resulting congestion on the Bitcoin blockchain have further compounded these issues.
As the Bitcoin community navigates these obstacles, it is essential to strike a balance between expanding the capabilities of the blockchain and preserving its fundamental principles. Addressing these challenges will require collaboration and innovative solutions to ensure the sustained growth and development of Bitcoin Ordinals within the broader Bitcoin ecosystem.
FAQs
Q: What are Bitcoin Ordinals? A: Bitcoin Ordinals refer to a collection of unique digital assets, including Ordinal inscriptions, Ordinal NFTs, and Bitcoin NFTs, that have gained popularity within the Bitcoin community for their various benefits.
Q: Why have Bitcoin Ordinals experienced a decline in activity since April? A: There are several reasons contributing to the decline in Bitcoin Ordinal activity, including the emergence of “cursed” inscriptions, Bitcoin’s shift away from being a pure P2P system, increased transaction fees, and congestion within the Bitcoin blockchain.
Q: What are “cursed” inscriptions? A: “Cursed” inscriptions are Bitcoin Ordinals that possess a negative identification number, rendering them unrecognized and untradeable within the Ordinal protocol.
Q: How have increased transaction fees impacted the Bitcoin community? A: Higher transaction fees have incentivized miners but have also led to concerns about financial inclusion and the accessibility of Bitcoin transactions, particularly in countries where the cost to send transactions has significantly increased.
Q: What are the challenges posed by congestion in the Bitcoin blockchain? A: Congestion in the Bitcoin blockchain has resulted in longer waiting times for transactions, increased competition for block space, and heightened transaction fees, thereby impacting the user experience and overall efficiency of the network.
Q: What steps can be taken to address these challenges? A: To overcome these challenges, it is crucial for the Bitcoin community to explore innovative solutions that balance the expansion of blockchain capabilities while ensuring the preservation of Bitcoin’s core principles. Collaborative efforts and ongoing development will play a pivotal role in maintaining a robust and accessible Bitcoin ecosystem.