One lucky miner collected 6,701 Bitcoin (BTC), or nearly $200,000 in transaction fees, on Sunday night, surpassing Bitcoin’s current block subsidy of 6.25 BTC – an extremely rare event that illustrates how a recent spurt of activity on the blockchain has related to the Ordinals protocol led to increasing costs for the users.
Late last year, Ordinals introduced “inscriptions,” or any content, such as text or images, that can be added to sequentially numbered satoshis, or “sats” — the smallest units in Bitcoin — to create unique, non-fungible tokens, or NFTs. Ordinals are also now used to mint BRC-20, which are fungible tokens in all respects.
All of these new tokens have quickly gained popularity, but at a hefty cost. They have overloaded the Bitcoin network and pushed it to its operational limits, offering a real-world test of how the world’s first and largest blockchain could cope with the need to scale rapidly.
Fees for sending coins are increasing, transactions are waiting in queues longer, and some users and exchanges are already starting to consider alternatives. This includes the Lightning Network, a so-called “Layer 2” scaling solution designed to make Bitcoin transactions faster and cheaper.
Continue reading: Bitcoin Request for Comment tokens surge to $137 million market value
“Can someone explain how I’m going to get people on board with these fees?” tweeted Anita Posch, Bitcoin educator and founder of Bitcoin for Fairness. “I mainly host people in Africa. They don’t have the privilege of paying these high fees like you do. You really need BTC while just messing around.”
BRC-20s are inscriptions of JSON (JavaScript Object Notation) data—snippets of code that port data structures across different platforms. And since the JSON inscriptions are actually code, they can be programmed to mint huge pools of tokens — a small block-sized batch at a time — effectively creating fungible tokens over a non-fungible protocol.
This ability to mint massive amounts of tokens out of thin air is what is causing the hysteria — and fear for blockchain users. Recent blocks have been chock full of BRC-20 transactions, with fees hovering at $20 per transaction, an 800% increase from the $1-2 per transaction fee that has been in place for most of 2022 was typical.
This spike in fees sent shockwaves through the bitcoin ecosystem, causing Binance, the world’s largest cryptocurrency exchange, to temporarily halt bitcoin withdrawals due to fee bugs and frustration in certain parts of Africa and Latin America, where some residents rely on bitcoin on a daily basis and distress triggered payments.
Bitcoin’s high fees have an undeniable impact on users who rely on base layer payments. This is where the Lightning Network comes in. The Lightning Network is a Bitcoin Layer 2 scaling solution where a collection of interconnected computers route Bitcoin payments off-chain, resulting in cheaper and faster transactions.
Continue reading: Block demand drives fee spikes as Bitcoin-based meme coins thrive
Binance said it is in the process of integrating Lightning amid the sudden spike in Bitcoin fees.
But even Lightning requires an initial on-chain transaction to set up a payment channel, and according to Posch, the cost is so prohibitive that even that single transaction is now unaffordable for many.
“Can’t use on-chain, can’t open channels,” Posch tweeted. “Makes the police Lightning the only option. And all because some people think Bitcoin is fun to crack.”
This last point about Bitcoin breaking has been a recurring theme on Crypto Twitter following the chain’s NFT Mintfest.
While Posch suggests that meme-loving hackers are having fun testing Bitcoin’s limits, others have adopted a more conspiratorial interpretation, suggesting without evidence that the BRC-20 phenomenon is in fact a coordinated attack on the world’s dominant blockchain.
