The Ordinals hype is real, with the NFT inscriptions now regularly taking over 50% of Bitcoin block space.
miners have earned nearly $600,000 in two months from a new controversial nonfungible token (NFT) protocol called Ordinals that has triggered a surge in user activity.
Ordinals allow users to inscribe data in images and other media types in newly mined blocks on the blockchain that is otherwise largely used for peer-to-peer (P2P) monetary transactions.
The advent of Ordinals has coincided with Bitcoin’s mean block size jumping from its typical average of 1.5–2 MB to between three and 3.5 MB in early February.
Simultaneously, the number of pending SegWit and non-SegWit blocks in the Bitcoin mempool has also increased significantly — the highest since the FTX collapse, as shown below.
On some occasions, Ordinals’ data has been comprising over 50% of Bitcoin block space.
This describes the growth in the user base and an upwards pressure on the fee market from usage beyond the typical investment and monetary transfer use cases.
Bitcoin miners generate most of their revenue from the network’s block subsidies, i.e., finding or “mining” new blocks. By comparison, the share of miners’ earnings from transaction fees is only about 3%.
Currently, the Bitcoin network rewards miners with 6.25 BTC per block. But this subsidy will drop by 50% to 3.125 BTC in spring 2024 in a halving event, which happens every four years. As a result, the share of miners’ revenue from transaction fees is expected to rise over time as block rewards decrease.
To some, Ordinals introduce what’s called miner extractable value, or MEV, which has been previously associated with mining on Ethereum.