LIFE BEYOND FIRST CLASS
FINANCE
THE RISE OF
ORDINALS
The Ordinals phenomenon is reshaping the Bitcoin landscape, offering new opportunities for miners but also posing significant challenges in terms of blockchain efficiency and user experience.
TOM HOLLAND
Bitcoin's blockchain is witnessing a seismic shift with the advent of "Ordinals", a novel form of NFT-like inscriptions. These digital assets, which include images, videos, and even digital art, are stored directly on the Bitcoin blockchain. The concept, launched earlier this year, has gained massive popularity. Over a single weekend, more than 1.2 million new ordinals were created, and the trading volume recently soared to over $305 million, outpacing Ethereum and Solana's NFT volumes. However, this surge in popularity comes with significant implications.
The enthusiasm for Ordinals has led to an unexpected consequence: a dramatic increase in Bitcoin transaction fees. On a recent Sunday, fees reached $37 per transaction, a steep rise from the $1 to $2 range observed in September and the highest since April 2021. This spike in fees is attributed to the blockchain congestion caused by the influx of Ordinals, with over 300,000 transactions waiting for confirmation during peak times.
Amidst user frustrations over rising fees, Bitcoin miners are experiencing a financial windfall. Companies like Riot Platforms, Marathon Digital, and Hut 8 are reaping significant benefits. This boon is particularly timely as they face the upcoming Bitcoin halving, a scheduled event where the reward for mining Bitcoin transactions is halved, which occurs approximately every four years. The increased transaction fees driven by Ordinals have boosted miners' revenues by 60% in the fourth quarter, totaling $2.5 billion.
The integration of Ordinals into the Bitcoin blockchain is more than a trend; it represents a critical juncture in the digital asset space. While it opens new revenue streams for miners, ensuring the long-term sustainability of Bitcoin's ecosystem remains a challenge. The increased fees, while beneficial for miners, could hinder broader crypto adoption due to their impact on transaction costs (imagine paying a $37 fee for a small transaction like buying a latte). Furthermore, there's a growing debate about the role of Ordinals, with some critics arguing that they are "spamming the blockchain" and calling for their regulation or ban.