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Inscriptions frenzy causes congestion on the Bitcoin network

In this post:

  • The Bitcoin ordinal inscriptions frenzy has caused massive congestion on the Bitcoin network.
  • The drama continues amid high fees and network efficiency issues.

In recent years, Bitcoin’s network has frequently encountered congestion, causing transaction fees to surge and raising concerns in the crypto community. Currently, the network is facing another episode of congestion due to Ordinal Inscriptions, as noted by Bitcoin on-chain analyst Willy Woo. Woo stated that the mempool is now at the highest point in the history of BTC since data was recorded. This observation was echoed by James Check, the lead analyst for Glassnode, who pointed out an increase in demand for blockspace due to inscriptions.

Inscriptions causes BTC mempool to reach a historic high

Inscriptions, similar to NFTs (Non-Fungible Tokens), allow users to record various data, such as images, text, or audio, onto the blockchain. While fees haven’t reached the levels seen during the Ordinal craze in early May, the network has been unable to clear its mempool. In the context of blockchain, the mempool functions like a waiting room, where users submit Bitcoin transactions (or inscriptions) and wait for miners to select and record those transactions in the public ledger. As of the time of writing, approximately 393,000 Bitcoin transactions remain unconfirmed.

Check explained that inscriptions are creating what he calls “baseload pressure,” accounting for a significant portion, roughly 50–60%, of confirmed transactions. In essence, inscriptions are contributing to the network’s congestion. Check noted that the void that is being left empty on the blockspace is being filled with Inscriptions, which has happened over the last five months. He also pointed out that these types of transactions are sensitive to high fees but are willing to use low-cost blockspace. Increased inscriptions mean more transactions, which, in turn, lead to higher fees.

The drama continues amid high fees and network efficiency issues

Interestingly, some members of the Bitcoin community welcome these higher fees. Woo, for instance, mentioned that he is currently paying $7.50 to move BTC and expressed his desire for high transaction fees. He emphasized that very soon, the subsidy on the Bitcoin network will run out and the asset will be secured by only the fee generated from its market. Woo also mentioned the Lightning Network, a Layer-2 scaling solution for Bitcoin, but expressed concerns that it might be compromised for smaller transactions at these high fees. Woo explained the delicate balance Bitcoin must maintain, stating that we are currently walking a middle path.

If transaction fees are too low and changes are made to increase capacity, the network’s security could be compromised in the future. On the other hand, if fees become too expensive, the Lightning Network might lose its decentralization and security for everyday payments. Woo acknowledged the progress made by developers in improving the efficiency of the blockchain since the congestion experienced in 2017 when payment fees were similar to the current levels. However, the duration of the current congestion remains uncertain, and Woo remains cautious about its implications.

Woo also clarified that since Inscriptions emerged during the bear market the fees have already reached $7.50. Interestingly, he also raised questions about what might happen during a bull market. He concluded with a somewhat ominous prediction, suggesting that as Lightning Network takes on more transactions, payment frauds might also increase as a result. The Bitcoin network’s congestion and the resulting impact on transaction fees continue to be topics of discussion and concern within the crypto community. Balancing the need for security, decentralization, and efficient transaction processing remains a challenge as Bitcoin’s adoption and usage grow.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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