Looking at The Block’s chart of transactions on the Bitcoin Network on a daily basis, we see a very high volume of bitcoin transactions taking place right now. There are a few reasons for this. We equally see a surge in fees due to the increasing minting of Ordinals, a type of Bitcoin-linked non-fungible tokens (NFTs).
This surge has been driven by nearly 1.9 million inscriptions uploaded to the blockchain over the past two weeks. The average transaction fees for using the Bitcoin blockchain have risen significantly, indicating the impact of Ordinals on the network’s activity.
The surge in Bitcoin transaction fees is closely linked to the high number of transactions, particularly the increased activity around Ordinals inscriptions. When there’s a rise in transaction volume, especially with complex transactions like those for NFTs, it puts greater demand on the network’s processing capacity. This demand leads to higher transaction fees as users are willing to pay more to prioritize their transactions in a congested network. Essentially, the high volume of transactions, driven by factors like the popularity of Ordinals, results in a crowded network, which in turn causes the fees to increase.
Extra Bitcoin Trading Activity
Another contributing factor to the high transaction volume of Bitcoin is the general uptick in trading activity. For instance, on a particular Wednesday, Bitcoin volumes were reported at $173 million, which was 59% above the 30-day average volume. This increase in trading volume is linked to movements in traditional markets, with rallies in stocks and a sell-off in the U.S. dollar benefiting cryptocurrencies like Bitcoin.
The recent increase in Bitcoin transaction fees has been partly attributed to various market dynamics, including the listing of Ordinals (ORDI), a BRC-20 token, on exchanges like Binance. This listing led to increased activity in Ordinals transactions. Additionally, the rise in interest in Ordinals and the recent price trend of Bitcoin have contributed to the rise in fees and transaction volumes. On a specific date, the transaction volume of Bitcoin surged to over $38 billion, marking the highest for the month at that time.
Here’s how to read this chart. A Bitcoin transaction represents the movement of Bitcoin value, which is broadcasted to the entire network and then aggregated into blocks. Each transaction generally uses outputs from previous transactions as its inputs, reallocating the Bitcoin values to new outputs. These transactions are transparent, as they are not encrypted, allowing anyone to view every transaction ever recorded in a block. Once a transaction accumulates a sufficient number of confirmations, it becomes virtually irreversible, cementing its place in the blockchain.