Glassnode, a leading on-chain analytics firm, has released a report highlighting a significant surge in demand for Bitcoin block space. The spike in demand was primarily driven by speculators looking to mint BRC-20 tokens using text inscriptions, resulting in a surge in miner fee revenue and surpassing the 6.25 BTC block subsidy.
The surge in demand for Bitcoin blockspace has led to a record number of transactions on the Bitcoin network. Transaction counts reached all-time highs, with an average fee per block surpassing the block subsidy. This increase in mining revenue is a welcome relief for miners who had suffered from the bear market in 2022.
The report delves into the impact of BRC-20 tokens on Bitcoin’s on-chain activity, inscription types, and miner revenues. BRC-20 tokens are a proposed mechanism for issuing tokens on the Bitcoin ledger using JSON text files inscribed into the blockchain.
The demand for BRC-20 tokens resulted in an influx of transactions, with a new daily transaction count of 682k, surpassing the previous peak in 2017. The average number of transactions per block more than doubled, reaching over 4.3k per block.
This increase in transaction counts can be attributed to the 75% discount applied to witness data, allowing for a denser consumption of available block capacity.
Interestingly, the number of active addresses fell to cycle lows, suggesting that many BRC-20 users may have reused their Bitcoin addresses, possibly due to their familiarity with account-based chains like Ethereum or Solana.
The rise of BRC-20 tokens has seen a shift from primarily image-based inscriptions to text-based inscriptions. The small data footprint of text inscriptions, coupled with the high fees users were willing to pay, led to an average transaction size of 405 bytes, an all-time low.
Text-based inscriptions accounted for over 50% of total confirmed transactions, surpassing image inscriptions by a significant margin.
Bitcoin Miners Are Paid A Brief Bonus: Fee Pressure & Revenue Uptick
Miners experienced a brief bonus as the urgency of BRC-20 transactors drove fee pressure to extraordinary levels. For the fifth time in history, the average fee paid per block surpassed the block subsidy, reaching 6.66 BTC in fees per block.
During this surge, text files accounted for a substantial portion of total fees paid, demonstrating the scale of demand. Miners earned a cumulative sum of 1,262 BTC in fees, with 1,090 BTC generated during the past week alone.
The increase in fee pressure resulted in elevated miner revenue, with the proportion of revenue associated with fees reaching 11.5%, similar to the levels observed during the 2017 and 2021 bull markets. However, the surge in fee pressure was short-lived, subsiding after a few days.
Despite the revenue uptick, the overall impact on miner revenues remains limited, as hash-price, a metric accounting for BTC spot price, fee pressure, and estimated hashrate, continues to experience a downtrend.
Miners spent a significant portion of the fees earned, and the majority of the revenue boost provided relief after the challenging 2022 bear market.
While the long-term potential of BRC-20 tokens and inscriptions remains uncertain, they have introduced a new buyer for Bitcoin blockspace and shed light on the demand for Bitcoin’s settlement assurances.
Nevertheless, the surge in demand for blockspace underscores the importance of understanding these emerging technologies’ technical, practical, and philosophical implications.
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