Satoshi Nakamoto, the creator of Bitcoin, predicted in 2010 a future in which transaction fees would become the main compensation for miners once the block reward became very small.
“In a few decades, as the reward [de mineração] becomes too small, transaction fees will become the main compensation for nodes. I am sure that in 20 years there will be a very large number of transactions, or no volume at all.” — said Nakamoto on February 14, 2010 on BitcoinTalk.
The future predicted by Nakamoto has arrived and for the first time in history, transaction fees exceeded block rewards, marking a historic turning point in the Bitcoin economy.
The change is related to the controversial Ordinals, inscriptions of small text and data files on the Bitcoin blockchain, which have become a subject of intense debate on the network of the world’s largest cryptocurrency.
Although they do not add direct financial value, these registrations have become increasingly relevant and represent around 50% of daily transactions, according to mempool data.
With the introduction of the BRC-20 token standard, there was an increase in the frequency of text-based inscriptions, which, although smaller, significantly expanded Bitcoin’s range of UTXOs and contributed significantly to the increase in transaction fees.
According to data from mempool, the current minimum transaction rate on the Bitcoin network exceeds 650 sat/vB (~US$39), with over 400,000 transactions to be confirmed and a memory usage of over 300 MB and a range of 1.41 GB.
The above data means that regular Bitcoin users cannot make quick transactions without paying at least R$177 in fees unless they set lower fees, which translates to transactions taking longer to confirm.
Other solutions include using second-line solutions such as Liquid or Lighting Network.
The new network order had a remarkable economic impact. Adam Back, Bitcoin pioneer and well-known figure in the cryptocurrency world, highlighted a block where transaction fees were equal to the current block reward of 6.25 BTC, which is indicative of the changing incentive structure of Bitcoin mining.
The event reflects a new reality in which transaction fees will account for a significant portion of miners’ compensation, as predicted by Nakamoto, ensuring the long-term security and viability of the network.
6.25 btc fees, 6.25 btc subsidy in this block. I don’t think we need to worry about mining incentives in the future after all. https://t.co/0aApwiobZG
— Adam Back (@adam3us) December 16, 2023
The rankings controversy
Opinions about Ordinals are divided. Some community members view subscriptions as a form of “digital waste,” taking up valuable space on the blockchain and distracting from Bitcoin’s core utility as a peer-to-peer currency.
However, others argue that these inscriptions add cultural value to Bitcoin and challenge the limits of its infrastructure, paving the way for future innovations.
“You can’t stop JPEGs in bitcoin. Complaining will only make them do more. Try to stop them and they will do it in even worse ways. High costs drive Tier 2 adoption and force innovation. So relax and build things.” — Said Adam Back, pioneering Bitcoin developer.
you can’t stop JPEGs on bitcoin. Complaining will only make them do it more. they try to stop them and they will do it in even worse ways. the high fees encourage the adoption of Layer2 and force innovation. just relax and build things.
— Adam Back (@adam3us) December 16, 2023
Subscriptions benefit from Bitcoin’s SegWit scaling upgrade, allowing discounted rates for space-saving transmissions. This has led to a rise in average transaction fees and transfer delays, challenging Bitcoin’s original vision as a fast and accessible payment system.
Bitcoin’s current situation illustrates a crucial moment in its evolution. The Bitcoin community is at a crossroads, balancing between preserving Nakamoto’s original principles and adapting to new technological and economic realities.
This debate is not only technical, but also deeply ideological, reflecting the diverse philosophies and views on what Bitcoin should represent.
NFTs and tokens on Bitcoin
First of all, it’s important to talk about BRC-20, a token standard that uses the Ordinals protocol to write content in satoshis (the smallest unit of Bitcoin) for subscriptions. Written information can consist of texts, images, videos, etc.
The token is experimental and minted on the Bitcoin network, which means a whole new ecosystem on the Bitcoin network, allowing developers to create NFTs and even other cryptocurrencies within Bitcoin, just like Ethereum.
Tokens are staked on the blockchain using the Ordinal protocol and can be minted by anyone. They are based on a first come, first served basis and do not support smart contracts.
With the popularity of BRC20, in addition to the usual protocols, atomic protocols, Rune protocols, PIPE protocols, etc. have appeared one after another, all in the hope of creating different content in the Bitcoin ecosystem.
Each protocol explores new ways to use the Bitcoin network and no one knows who the ultimate winner will be; each protocol also has an associated core token, which has risen to varying degrees from the early days of minting to the present.
In short, in a simpler way: just as we see thousands of tokens being created on the Ethereum network, we will see ‘tokens’ running on the Bitcoin blockchain.
The birth of ordinal numbers and the change in price dynamics represent a turning point for Bitcoin and this new phase challenges the network to adapt and evolve.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
