The trend coincided with a notable surge in block space demand – a trend that has happened on par with the release of Ordinals and Inscriptions. The elevated demand has been sustained ever since, according to Glassnode’s latest analysis.
Despite the concerns surrounding Ordinals congesting the Bitcoin network, the blockchain intelligence firm suggests that there is “minimal evidence” that inscriptions are displacing monetary transfers.
Are Inscriptions Displacing Monetary Transfers?
In its latest report, Glassnode explained that Inscriptions are acting as a “buyer of last resort for cheap block space” as it appears to be buying and consuming the cheapest available block space and are displaced by more urgent and higher-value monetary transfers. This is because users typically set relatively low fee rates, which evidences a willingness to wait longer periods of time for confirmation.
The report also found that the percentage of blockspace consumed by Image vs. text-based inscriptions is almost the exact inverse of the share of transactions.
As such, the first wave of Image inscriptions routinely consumed a fairly large – more than 40% – of the available blockspace. This stands in contrast to the second wave of text inscriptions and BRC-20 tokens, which consumed a relatively stable 20% or less, depicting their smaller data footprint.
Such a finding essentially suggests that these text-based inscriptions have served as a “filler” for blocks.
“Inscriptions are best thought of as a sort of ‘packing filler’ which is stuffed into any remaining space once the higher value monetary transfers are packed into blocks.”
Increased Competition for Miners
The report also stated that inscriptions have played a pivotal role in enhancing the base-load demand for block space and increased fee revenue meaningfully. However, the hash rate competing for it is has also increased by more than 50% since February.
This, in turn, has escalated competition among BTC miners seeking to rake in revenue fees.
“With extreme miner competition in play, and the halving event looming, it is likely that miners are on the edge of income stress, with their profitability to be tested unless BTC prices increase in the near term.”
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