The industry has always been aware that a time would come when an increase in fees would make Bitcoin transactions extremely impractical.
While many assumed that the rising cost of transactions would occur with mass adoption, it was the rise of ordinals that caused the drastic increase in fees.
Listings on the Bitcoin blockchain appeared at the beginning of the year and quickly gained popularity. As of May 1, there were over 3.2 million Bitcoin listings, with that number continuing to grow as the quarter progressed.
Ordinal signups pushed Bitcoin transactions to their all-time high in 2023, with the network completing over 682,000 transactions in one day.
Such a spike in transactions naturally led to increased memory usage, with some blocks filled with tens of thousands of transactions. Data from Mempool showed that the average fee for low priority transactions reached $4.59 on May 2, reducing the difference between high priority fees to less than $0.40.
The rise in popularity of ordinals and the increase in fees they have caused have reignited the debate about Bitcoin’s diminishing block rewards. As the cost of mining Bitcoin increases as more miners enter the space, there will come a time when the reward will no longer be sufficient to encourage block production.
One of the proposed solutions to this problem is an increase in miner fees, which would incentivize miners even when block rewards do not cover the cost of mining. However, for a fee increase to be feasible, there needs to be a lot more activity on the Bitcoin network.
So far, listings have dramatically increased the percentage of miner revenue from royalties. Data analyzed by CryptoSlate showed that around 12% of miner revenue currently comes from fees, a level previously seen only in bull markets.
Bitcoin listings have drawn criticism from all corners of the crypto market. However, both parties seem to agree that they have highlighted the need for a high-speed settlement solution for BTC, i.e. the Lightning Network.
The payment protocol enables fast transactions between participating nodes while keeping fees incredibly low. Analysis by Bitcoin Magazine showed that the median fee for a Bitcoin flash transaction was around 0.003%. This figure is well below the lower limit of the average credit card processing fee in the United States, which is around 1%.
While the popularity of ordinals will certainly decline over time, the network is linked to another project that consumes even more block space. With a ability of 5,400 BTC, 15,400 nodes and over 72,700 channels, the Lightning Network presents itself as the perfect solution for Bitcoin payments.
The article Bitcoin Transactions Growing highlights the importance of Lightning Network and appeared first on CryptoSlate.