Bitcoin Ordinals and Inscriptions: A Growing Buyer of Block Space
This year, Bitcoin ordinals and inscriptions have become a significant buyer of block space, resulting in increased transaction fees and positively impacting miner revenue. However, as the halving event approaches, there are concerns about the future.
Bitcoin Ordinals Filling The Gaps
Since their introduction in February 2023, inscriptions have been buying block space and filling up the mempool. They primarily fill in leftover space after higher-value monetary transfers. However, there has been a significant increase in pending transactions in the mempool since May, with most of these transactions having a small data footprint. Inscriptions are sensitive to fee amounts and often get displaced by urgent monetary transfers.
“This confirms that these small-size text inscriptions have become a significant source of demand for blockspace.”
Despite the benefits for miners from increased fees due to inscriptions, their overall income remains low. The hash price is currently at an all-time low of $0.059, down 50% from the Bitcoin ordinals pump in May and 85% from the peak of $0.40 during the bull market. Miners will now earn just 2.26 BTC per Exahash active on the network.
Halving Stress for Miners
With the halving event scheduled for April or May next year, miners may face income stress and unprofitability unless BTC prices rise significantly. The halving will reduce their block rewards in half to 3.125 BTC. The mining industry is known for its cut-throat competition and unforgiving nature.
“The endless logarithmic descent of hashprice shows just how cut-throat and unforgiving the mining industry is.”
There is minimal evidence to suggest that inscriptions are displacing monetary transfers. However, given the intense competition among miners and the approaching halving event, miners may face income stress and profitability challenges unless BTC prices increase in the near term.
Hot Take: Miners Brace for Income Stress Amidst Halving Event
Bitcoin ordinals and inscriptions have played a significant role in buying block space this year, benefiting miners through increased transaction fees. However, as the halving event draws near, concerns arise regarding miner income and profitability. While inscriptions have filled the gaps in block space after higher-value transfers, there has been a notable increase in pending transactions with small data footprints. Additionally, the hash price remains at an all-time low, further adding to miner challenges. The impending halving will reduce block rewards by half, potentially leading to income stress and unprofitability for miners. With intense competition in the mining industry, miners must rely on BTC price increases to alleviate these challenges.
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