Many bitcoiners are up in arms about the high fees amid a surge in new activity on the original blockchain. The fees, which are determined dynamically by a competitive bidding process, soared to a staggering $30.19 for a simple bitcoin transaction on May 8, hovering around $2 since July of 2021 – nearly two years.
The situation is so dire that some bitcoiners, especially so-called “maximalists”, have gone so far as to proposal for censorship BRC-20 tokens and other assets based on the “ordinals” issuance method. Those assets use new features to write data into bitcoin transactions, and appear to be driving the price increase. Much can be said about the ethical debate surrounding the release of BRC-20, but in a surprising development, extremist figure Michael Saylor (former CEO of MicroStrategy) has now declared their emergence “booming”.
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Leaving aside the question of “what is bitcoin for?”, here’s a more direct take: bitcoin is not scaling, and blaming the ordinals doesn’t change that fact.
The chain would be facing similar scaling issues if only a slightly larger portion of the world was using it for monetary transactions. This means that the BRC-20 kerfuffle is, ironically, ultimately a blow to the “maximalist” vision held by those railing against non-monetary uses of bitcoin.
crowded mempool
The explosion of interest in the BRC-20 token on bitcoin has led to a massive increase in transaction volume on the base layer network, and in turn increased transaction prices. There are many different ways to put this congestion into context, but a very good metric is the congestion in the bitcoin mempool. The mempool is where transactions wait to be validated, and the fees associated with them are ordered according to the bid. More full mempool means more competition to move your transaction to the next block.
Reviewing the data is eye-opening in more ways than one. (I used this straightforward but stellar mempool visualization tool By Jochen Hoenicke, a researcher at smart contract security firm Certora.)
First of all, bitcoin’s mempool has never seemed so full in terms of transaction volume – not for a long time. There were 200,000 transactions queued at the last major peak in April of 2021, but yesterday the number jumped to 450,000. (Hoenicke’s node only tracks back to 2017, but before that bull market, bitcoin’s congestion and fees were negligible.)
Remarkably, these transactions are often small. You can also check out Courtesy of Bitinfocharts average bitcoin transaction size has fallen in recent times.
The explosive volume of short transactions seems to confirm that the increase in demand is driven by the madness of speculators (and/or future rug-pullers). release and mold Tokens using the experimental “BRC-20” standard. There is hype around the token right now, and it appears degens wants his $pepes and other casino tokens now, not in block 12 or 14. Coinmarketcap claims that the staggering 8,500 tokens have been issued on bitcoin in only a few weeks since the BRC-20 standard was first introduced.
Given that these are largely “memecoins” that amount to little more than gambling, the bidding war is likely to be short-lived. And in fact, as of May 10, fees had already declined slightly from their May 8 peak.
But here’s the thing: If a few million people actually wanted to use bitcoin to send money regularly peer-to-peer, we’d be in the exact same position. And it will be permanent rather than fleeting. Calls for bitcoin censorship from extremists are arguably inconsistent for a number of philosophical reasons, but this practical inconsistency is most striking. Bitcoiners troubled by a temporary fee spike driven by Digenes may be better off focusing their energies on solving the looming problem of high fees driven by everyday users.
See also: The rise and fall of bitcoin maximalism , Opinion
Most fundamentally, as Nick Carter, co-founder of Castle Island Ventures, pointed out in these pages yesterday, “High prices are the cure for high prices.” We’re seeing this in real time, specifically Binance Integrates Layer 2 “Lightning Network” In its bitcoin withdrawal flow. Lightning is aimed at offloading small transactions off the base chain, but requires a fairly arcane setup for peer-to-peer use. At the same time, lightning service firms, such as David Marcus’ LightsparkThere’s a sudden goal-rich environment to make the Lightning easy for average Joes.
In this regard, the increase in BRC-20 charges appears to be a blessing in disguise: a warning shot that should trigger a frenzy of preparations for a sustained barrage.
There’s a final, fanciful irony here. The real feasibility of both Ordinals and Fungible Tokens on bitcoin is still highly unclear – a critical bug in inscriptions For example, was recognized only last week. But if you take a look, it’s not impossible to imagine some form of ordinal technology enabling entirely new approaches to scaling bitcoin, perhaps even including “layer 2” technology that could accomplish Ethereum. Is.
This may prove even more distasteful to the greater crowd than sharing your mempool with jpeg and dzen. But if you’re really committed to growing bitcoin, it might be time to think big.
The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
