New Era in Bitcoin with Ordinals

The release of Bitcoin NFTs - known as Ordinals - drove the number of non-zero Bitcoin addresses to a new all-time record high of 44 million, according to cryptocurrency analytics platform Glassnode.

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In an issue posted on February 13, the company (Glassnode) explained that for the first time in Bitcoin’s 14-year history a portion of the network’s activity is being employed beyond peer-to-peer Bitcoin (BTC) transfers:

“This is a new and unique moment in Bitcoin’s history, where an innovation creates network activity without the traditional transfer of coins for monetary purposes,” Glassnode noted.

Furthermore, the company explained that the rise of Ordinals contributed to a short-term increase in Bitcoin network usage, which brought many new active users with a non-zero BTC balance:

“The main source of this activity is due to Ordinals, which instead of carrying a large payload of coin volume, are carrying a larger payload of data and new active users,” Glassnode said.

Glassnode goes on to note something else more important: “This is an increase in the user base […] beyond the typical use cases for investment and money transfer.”

A new player competing for block space

Glassnode points out that Ordinals are now competing for block space demand, which “creates upward pressure as far as fees are concerned” and even reveals that this has not led to a significant increase in the amount of fees on Bitcoin transactions.

According to Glassnode, since the launch of Ordinals on January 21, the upper range of the average Bitcoin block size has increased from 1.5-2.0 MB to 3.0-3.5 MB in a matter of weeks.

However, this did not lead to an increase in fees. Although there have been some small moments of significant growth in network usage, Glassnode has clarified that a new lower transaction limit fee required for block inclusion has been achieved since Ordinals was released, on January 21.

The technology behind the Ordinal protocol was enabled by Taproot’s soft fork, which went live in November 2021. Bitcoin Ordinals were released on January 21.

The two schools of thought

Some notable “Bitcoiners”, such as Blockstream CEO Adam Back, recently expressed their dislike for the Ordinals protocol, suggesting that it deviates from Bitcoin’s purpose as a peer-to-peer electronic cash system.

However, others were more open to the idea. Bitcoin “bull”, Dan Held, had argued on several occasions that Ordinals bring more “economic use cases to Bitcoin”.

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