Summary:
- The average cost of sending a single transaction on Bitcoin’s blockchain soared to almost $20, its highest point since April 2021.
- It seems that increased demand for BTC blockchain space was triggered by heightened activity on the Ordinals protocol and tokens issued using the BRC-20 standard.
- Binance was forced to halt BTC withdrawals twice on Sunday as network congestion peaked, although the crypto exchange later resumed operations after moving $4.4 billion in assets.
Bitcoin (BTC) transaction fees rose to their highest point in two years amid growing interest in the Ordinals protocol and demand for BRC-2O tokens issued on BTC’s blockchain.
According to on-chain data, BTC transaction fees reached as high as $19.21, a two-year high. The cost of sending a transaction on BTC’s blockchain has not climbed so high since April 2021 when fees skyrocketed to $62.
A drastic increase in meme tokens issued on Bitcoin’s network along with a sharp climb in Ordinals activity seem to be the main reasons behind exorbitant transaction fees. Memecoin mania also drove up gas fees on Ethereum’s blockchain.
Ordinals Drive Bitcoin Network Congestion
The Ordinals protocol introduced by developer Casey Rodarmor in January 2023 allows users to inscribe data on every satoshi, the smallest BTC unit. This incentivized users to experiment with fungible token standards and non-fungible tokens also known as NFTs.
Data from Dune Analytics indicated that over 3 million NFTs have been issued on BTC’s blockchain since Ordinals debuted. The majority of these NFTs are text-based and created through a process called ‘inscription’.
Shortly after Rodarmor unveiled the Ordinals protocol, a developer known by the pseudonym Domo leveraged the protocol to build the ‘Bitcoin Request for Comment’ (BRC-20) token standard. BRC-20 allows transferable assets on BTC’s blockchain allowing users to issue and trade tokens on crypto’s largest network by market cap.
Indeed, it seems the BRC-20 token standard has breathed new life into BTC’s blockchain as over 11,000 tokens have been issued using Domo’s standard. OrdSpace data showed tokens created under BRC-2O boast almost $1 billion in combined market cap.
ORDI, believed to be the first BRC-20 token and native token of Ordinals marketplace, leads the pack with over $220 million in marketcap and more than 7,000 unique holders. BRC-20 also opened up BTC’s blockchain to memecoin hysteria as tokens like Pepe, VMPX, and Meme garnered hundreds of millions in daily trading volume.
Notably, the Pepe token on BTC’s network is not to be confused with the Pepe memecoin issued on Ethereum.
Crypto commentators and BTC Maxis suggested that Ordinals beckons a new era for BTC and its network, beefing up utility and propelling network activity. The extra network demand also affected a major crypto exchange.
Binance paused BTC withdrawals twice on Sunday before resuming normal operations and mulling plans of integrating the Lightning Network, a layer 2 scaling solution built atop the BTC mainnet.
All pending $BTC withdrawal transactions have now been processed.
Once again, thank you for your patience and our team is already implementing solutions to make sure this doesn’t happen again. https://t.co/tY7S8R3U9d
— Binance (@binance) May 8, 2023
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Bitcoin transaction fees have hit an incredible two-year high as the number of major Ethereum-based tokens known as BRC-20 tokens continues to grow.
The increasing interest in BRC-20 tokens has driven greater demand for Bitcoin transactions as users move large amounts of funds between various blockchain networks. The rate of transaction fees paid to miners for processing Bitcoin transactions have hit heights last seen back in December 2017 when the Bitcoin price rose to its all-time high.
At the current rate, the average fees for processing a Bitcoin transaction have reached approximately $3.50. This is much higher than at the same time last year when the average fee was more than 30% lower than the current rate. This fee is used to incentivize miners on the Bitcoin blockchain to process transactions faster and reduce the amount of time people have to wait before their transfers are completed.
In comparison, the fee to process Ethereum transactions have remained relatively stable. For example, the average fee to process an Ethereum transaction currently stands at around 60 cents.
The primary driving force behind the surging demand for BRC-20 tokens is the development of DeFi protocols. Decentralized finance protocols enable users to access a variety of financial services on the blockchain without having to rely on third parties. This helps to eliminate the need for traditional banking fees and can be a useful way for individuals to save and transfer money without having to pay additional fees.
The increasing demand for BRC-20 tokens is being powered by the same enthusiasm that drove Bitcoin’s surge in value in late 2017. While the demand may slow down in the short-term, it is likely that this surge in Bitcoin fees is here to stay and could even increase as more users get involved in the emerging DeFi sector.
