Bitcoin Inscriptions Struggle to Impact Miner Revenue

Despite an increase in Ordinal inscriptions in 2023, a Glassnode investigation discovered that financial transactions continue to take precedence on the Bitcoin blockchain.

Glassnode researchers emphasized that “there’s little evidence that inscriptions are driving out monetary transfers.”

The report states, “Inscriptions appear to purchase and consume the cheapest available blockspace and are easily displaced by more urgent monetary transfers.”

Despite the increase, inscriptions represent less than 20% of transaction fees paid to miners.

The technology enables users to contribute content to the Bitcoin blockchain using Segwit and Taproot data structures.

As the BRC-20 token standard emerged, an initial wave of image NFTs transitioned to primarily text files, according to Glassnode researchers.

Multiple times this year, daily transactions have surpassed 550,000, as inscriptions have added more transactions to the limited block size.

The report revealed that the average block now contains up to 3,500 transactions, up from 2,500 in prior years.

Since May, between 40% and 60% of all confirmed transactions have been inscriptions. In 2023, the UTXO set grew by more than 46 million entries (an increase of 34%), the fastest growth rate ever recorded.

Despite increasing miner revenue, income per hash rate is near historic lows.

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“With extreme miner competition in play and the halving event on the horizon, miners are probably on the brink of income stress,” Glassnode stated.

Global network fees have doubled to approximately 38 BTC daily but only account for 4% of miner rewards.

Simultaneously, the mining difficulty of Bitcoin has increased by 50% due to the increased use of specialized and sophisticated mining equipment.

With the next halving predicted in just 206 days, Glassnode believes that most Bitcoin miners will face significant income challenges unless BTC prices increase substantially.

Glassnode noted that although inscriptions occupy space, they have not increased miners’ revenue.