Bitcoin’s average block size, which refers to the amount of data that can be processed in one block on the Bitcoin blockchain, has reached an all-time high of over 2.5 megabytes (MB). This is a significant milestone, as it marks the first time that the average block size has surpassed this level since Bitcoin was created back in 2009.
The rise in block size can be primarily attributed to the introduction of the Ordinals protocol in January 2023, which has led to a surge in demand for unique digital assets known as Bitcoin NFTs. These assets have been highly sought after since the launch of the Ordinals protocol earlier this year.
What are Bitcoin NFTs and the Ordinals protocol?
Bitcoin NFTs, or Bitcoin-based non-fungible tokens, are unique digital assets that are created, traded, and verified on the Bitcoin blockchain.
Bitcoin NFTs are created using innovative protocols, such as Ordinals, that allow for the inscription of digital assets onto the blockchain.
Ordinals protocol has had a significant impact on Bitcoin’s blockchain, enabling it to support a wider range of use cases and applications beyond traditional cryptocurrency transactions.
Bitcoin NFTs: Changing digital asset creation and trading
The popularity of the Ordinals protocol and its associated NFTs has created a significant opportunity for miners to earn additional income.
The high transaction volume of Ordinals has led to an increase in transaction fees, providing miners with a lucrative revenue stream. In fact, the $600,000 in transaction fees earned by miners is a testament to the growing demand for NFTs and the potential for new revenue streams in the Bitcoin ecosystem.
The Ordinals protocol was launched in January 2023 by software engineer Casey Rodarmor. This innovative protocol allows for the creation of unique “digital artifacts” on the Bitcoin network. These artifacts can take many forms, such as JPEG images, PDFs, video and audio files, and more.
These digital artifacts can be inscribed to a specific satoshi, which is the smallest unit of a Bitcoin, and each Bitcoin is composed of 100,000,000 satoshis, creating an asset that is verifiable and immutable on the blockchain.
As Rodarmor explains in the Ordinals documentation, this opens up new possibilities for creating and trading digital assets on the blockchain.
“It is possible to inscribe arbitrary content onto individual satoshis, resulting in one-of-a-kind digital assets that are native to Bitcoin. These digital artifacts can be held in Bitcoin wallets and transferred using Bitcoin transactions. The inscriptions on these artifacts are as secure, durable, immutable, and decentralized as the Bitcoin blockchain itself.”
Controversy surrounding Bitcoin NFTs and digital artifact inscription
The topic of inscribing digital artifacts to the Bitcoin blockchain has been a source of debate within the community, with differing opinions leading to a variety of discussions. One significant point of contention is the increase in block space that is required to inscribe the various Ordinals.
Historically, Bitcoin’s average block size has remained relatively stable, fluctuating between 0.7MB and 1.5MB from July 2021 to February 2023. However, since February 5th, the average block size has surpassed 2MB for the first time, currently sitting at approximately 2.2MB at the time of writing.
According to data from Glassnode, the introduction of Bitcoin Ordinals has resulted in the network reaching a new milestone of 44 million non-zero addresses. Despite the competition for block space that Ordinals create, there has been no significant impact on network fees, as noted in Glassnode’s latest newsletter.
Glassnode has described the advent of Ordinals as a “new and unique moment in Bitcoin history,” as it has generated network activity without the classical transfer of coin volume for monetary purposes.