Bitcoin miners already made nearly $600K from Ordinals' NFT transactions

Bitcoin (BTC) miners person earned astir $600,000 successful 2 months from a caller arguable NFT protocol called Ordinals that has triggered a surge successful idiosyncratic activity.

What are Bitcoin Ordinals? 

Ordinals let users to inscribe information successful the signifier of images and different media types successful recently mined blocks connected the Bitcoin blockchain that's different mostly utilized for peer-to-peer monetary transactions. 

Fee spent connected inscribing Ordinal NFTs connected the Bitcoin blockchain. Source: Dune Analytics

Since the launch of Ordinals successful mid-December, however, users person inscribed astir 74,000 NFTs into the Bitcoin blockchain, earning miners a cumulative $574,000 successful BTC transaction fees to date, data from Dune Analytics shows.

These NFTs see "digital artifacts" stemming from the derivative projects of Ethereum's CryptoPunks and Bored Ape Yacht Club postulation successful February.

— Jason A. Williams (@GoingParabolic) February 12, 2023

Rising emand for Bitcoin artifact space

The Ordinals protocol was made imaginable by Segregated Witness (SegWit) and Taproot, Bitcoin's web soft fork upgrades from 2017 and 2021, respectively.

Related: Ordinals protocol sparks statement implicit the spot for NFTs successful the Bitcoin ecosystem

For instance, the SegWit update efficaciously accrued Bitcoin's artifact capableness up to 4MB. 

Similarly, the Taproot update helps batch and verify aggregate transactions unneurotic arsenic agelong arsenic their size does not transcend 4 MB. This diagnostic allows the inscription of information specified arsenic images and videos successful Bitcoin blocks.

Bitcoin Taproot adoption successful caller weeks. Source: Dune Analytics

The advent of Ordinals has coincided with Bitcoin's mean artifact size jumping from its emblematic mean of 1.5-2MB to betwixt 3 and 3.5MB successful aboriginal February.

Bitcoin mean artifact size. Source: Glassnode

Simultaneously, the fig of pending SegWit and non-SegWit blocks successful the Bitcoin mempool has besides accrued importantly — the highest since the FTX collapse, arsenic shown below.

The fig of pending blocks successful the Bitcoin Mempool. Source: Glassnode

On immoderate occasions, Ordinals' information has been comprising implicit 50% of Bitcoin artifact space, according to BitMEX Research.

"This describes a maturation successful the idiosyncratic basal and an upwards unit connected the interest marketplace from usage beyond the emblematic concern and monetary transportation usage cases," noted Glassnode successful its play report, adding:

"Ordinals are a caller frontier [...] to observe however it affects and manifests successful some on-chain web and capitalist behavior."

Ordinals: BTC miners' new gross stream? 

Bitcoin miners make astir of their gross from the network's artifact subsidies, i.e. uncovering oregon "mining" caller blocks. By comparison, the stock of miner's net from transaction fees is lone astir 3%.

Currently, the Bitcoin web rewards miners with 6.25 BTC per block. But this subsidy volition driblet by 50% to 3.125 BTC by outpouring 2024 successful an lawsuit called halving that happens every 4 years. As a result, the stock of miners' gross from transaction fees is expected to emergence implicit clip arsenic artifact rewards decrease.

To some, Ordinals present what's called miner extractable value, oregon MEV, which has been antecedently associated with mining connected Ethereum.

Simply put, MEV is the maximum worth that miners tin get from producing caller blocks beyond the artifact rewards and transaction fees. 

If Bitcoin Ordinals volition instrumentality disconnected (and I deliberation it will) it’s truly bully quality for Bitcoin mining companies’ revenue, thing that’s not reflected successful their valuations yet.

— Marc van der Chijs (@marcvanderchijs) February 6, 2023

Critics, however, reason that Ordinals arsenic an "attack" that volition terms retired existent fiscal enactment and frankincense harm Bitcoin's representation arsenic a reliable P2P payments network.

"Bitcoin is designed to beryllium censor resistant," said Adam Back, co-founder and CEO of Blockstream, adding:

"[It] doesn't halt america mildly commenting connected the sheer discarded and stupidity of an encoding. At slightest bash thing efficient. Otherwise, it's different impervious of depletion of block-space thingy."

This nonfiction does not incorporate concern proposal oregon recommendations. Every concern and trading determination involves risk, and readers should behaviour their ain probe erstwhile making a decision.