The Cost of Inscriptions
Last week, the Bitcoin network collected transaction fees on par with Ethereum, marking a reversal of the long-standing trend where Ethereum had higher fees. According to IntoTheBlock, Bitcoin fees totaled $61 million between November 18 and November 25, slightly surpassing Glassnode’s data of ~$52.6 million. Meanwhile, Ethereum’s fees on Glassnode reached ~$61.5 million during the same period. This is a significant shift from last year when Ethereum consistently had higher fees than Bitcoin.
The change can be attributed to the use of “ordinals,” a new protocol that allows for the inscription of non-BTC tokens on the Bitcoin blockchain. This technology supports both fungible and non-fungible tokens, which were previously exclusive to Ethereum. As the popularity of ordinals increased, so did Bitcoin’s transaction fees.
Pros and Cons of High Fees
Minting ordinals NFTs can be expensive due to their image data being directly embedded into the Bitcoin blockchain, unlike Ethereum NFTs. This takes up significant memory space in each Bitcoin block, limiting room for lower-fee transactions. However, high fees incentivize Bitcoin miners by increasing their profits and encouraging them to continue securing the network. According to Hashrate Index, over 12% of rewards to the Bitcoin mining pool FoundryUSA this month came solely from transaction fees.
Hot Take: The Implications of Equal Fees
The recent equalization of transaction fees between Bitcoin and Ethereum raises questions about the usability and long-term security of both networks. While it demonstrates that Bitcoin can compete with Ethereum in terms of fees, it also highlights the strain that ordinals inscriptions put on the Bitcoin blockchain. As ordinals gain popularity and more tokens are inscribed on the network, it may lead to increased fees and congestion. Ultimately, this trend emphasizes the need for scalability solutions in both Bitcoin and Ethereum to ensure efficient and cost-effective transactions in the future.
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