Glassnode, a prominent on-chain analytics firm, has released a report detailing the recent surge in demand for Bitcoin blockspace. The primary driver of this demand has been the emergence of BRC-20 tokens, issued through text file inscriptions on the Bitcoin ledger. This new wave of speculative interest has led to a significant increase in transaction counts and fees.
Last week, the Bitcoin network experienced unprecedented demand as speculators rushed to mint BRC-20 tokens. This surge in activity resulted in immense fee pressure, driving miner fee revenue to all-time highs and surpassing the block subsidy for the fifth time. The increase in demand for Bitcoin blockspace has been driven by the interest in minting tokens through text file inscriptions.
Impact On Bitcoin On-chain Activity
The impact of BRC-20 tokens on Bitcoin’s on-chain activity has been remarkable. Transaction counts reached new all-time highs, with an average fee paid per block surpassing the block subsidy. The number of transactions per block more than doubled, indicating the dense consumption of available block capacity. ” A new ATH daily transaction count of 682k was reached this week, eclipsing the 2017 peak by an incredible 39%.”
Interestingly, the number of active addresses fell to cycle lows ( 566k per day), suggesting that many BRC-20 users may have re-used their Bitcoin addresses due to familiarity with other account-based chains.
One notable aspect of BRC-20 inscriptions is their small data footprint. Leveraging the 75% SegWit discount on witness data, the average transaction size for text inscriptions has collapsed to an almost all-time low.
This shift from image-based inscriptions to text-based inscriptions has led to a significant increase in the number of text files written on the blockchain. Text-based inscriptions now dominate the majority, accounting for 89% of the total (5.69 million).
The urgency of BRC-20 transactors is evident in the outstanding fees they paid. The average fee per block surpassed the block subsidy, reaching levels not seen since the 2017 market peak.
Miners Benefit From Fee Pressure
Miners earned substantial revenue during the height of the BRC-20 mania, with text files accounting for a significant portion of the total fees paid. The fee pressure associated with text files almost set a new all-time high for total USD-denominated fees paid per day.
Despite the revenue uptick for miners, the increase in fee pressure appears to be short-lived. The hash price, which assesses the impact on miner revenues, experienced a brief spike but has since subsided. Miners have only seen a modest increase in their balance compared to the fees paid.
Nevertheless, the emergence of BRC-20 tokens and text file inscriptions has sparked a significant increase in demand for Bitcoin blockspace. This surge in activity has provided a welcome reprieve for miners after the challenging bear market of 2022.
However, the long-term viability of BRC-20 tokens and inscriptions remains uncertain. Well, it has provided a new perspective on the demand for the settlement assurances of Bitcoin.