Recent on-chain analysis by Glassnode challenges the critique surrounding Ordinals, particularly BRC-20 tokens, asserting that they do not pose a threat to traditional Bitcoin (BTC) transactions.
James Check, the leading analyst at Glassnode, clarified that the majority of Bitcoin block space is still dominated by regular monetary transactions. Inscriptions, notably BRC-20 tokens, merely occupy any remaining space after accommodating monetary transfers.
Comparing Ordinals: NFTs vs. BRC-20 Glassnode’s data reveals that inscriptions account for roughly 50% of total Bitcoin transactions alongside monetary transfers. However, despite their prevalence, inscriptions demonstrate greater efficiency in block space utilization compared to traditional transfers. Despite occupying less than 10% of block data size, inscriptions contribute between 20% and 40% of the network’s total fees.
Check emphasized, “We’re fitting more value, fees, and data into the same block. Inscriptions benefit Bitcoin by compensating miners while optimizing space utilization.”
Contrary to the initial perception of Ordinals solely involving weighty, image-based NFTs, the introduction of the BRC-20 token standard has led to a surge in smaller, text-based inscriptions. These frequent yet smaller inscriptions have notably expanded Bitcoin’s UTXO set, impacted the mempool, and consistently raised transaction fees.
A Glassnode report highlighted the prevalence of the BRC-20 token SATS, whose prolonged minting process resulted in a 45.5% surge in Bitcoin’s 21 million UTXOs. Additionally, Binance’s recent announcement of trading pairs for SATS further underscored its significance.
The Ordinals Debate The report described text-based inscriptions as “fillers” in blocks, akin to newspaper packing in a shipping crate. They occupy available block space in less active blocks but are superseded by more urgent monetary transfers.
Addressing critics, Check stated, “Opposition to Ordinals is ideological and subjective. Bitcoin operates based on objective consensus rules, independent of subjective values.”
Bitcoin Core developer Luke Dashjr criticized Ordinals transactions as “spam” exploiting a Bitcoin code flaw. His newly launched Bitcoin mining pool, OCEAN, filters out inscriptions to prioritize “real transactions” in blocks.