In 2023, a significant increase in transactions was caused by the Ordinals protocol, which allows digital objects to be exchanged over the Bitcoin network due to the numbering of satoshis. The first wave of interest in Ordinals came in the spring when the bulk was represented by visual images. In the second wave, interest shifted to meme coins, and the excitement was so intense that, on some days, they accounted for over half of all transactions.
Ordinals boosted the number of transactions processed to previously unseen levels.
So many transactions were completed due to the small space occupied by quasi-tokens in a block. While a large image may require the entire block, tokens, on the contrary, fill the free areas like grains of sand due to their technical specifics.
Despite the hype and large volume of operations involving them, Ordinals have consumed less than 20% of the block space since July.
The rest of the space is taken up by financial transfers, the weight of which varies greatly with the number of deposits and withdrawals. In December, monetary transactions reached 373,000 per day, the highest level since mid-2019.
The activation of market participants is driven by expectations of the upcoming approval of Bitcoin spot ETFs in the US, the halving event in April 2024 and a new bull season.
The trend is also evident in the increased interest in spot trading that crypto exchanges see in Bitcoin and Ethereum inflows/outflows.
Despite the large number of transactions, quasi-tokens don't occupy much space in the block. Financial transactions account for the main competition for space in blocks. On 17 December, the average fee reached $37, a level last seen in April 2021. The trend will likely continue as new participants get involved and the market grows.
This problem can be solved by increasing the block size, which some developers are already calling for. Others see Ordinals and high fees as an encouragement for developing second-tier networks.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)
