The launch of Bitcoin nonfungible tokens (NFTs) – known as Ordinals – has tipped the number of non-zero Bitcoin addresses to a new all-time high of 44 million, according to crypto analytics platform Glassnode.
In a February 13 report from Glassnode, the company explained that for the first time in Bitcoin’s 14-year history, part of the network’s activity was used for purposes other than peer-to-peer Bitcoin (BTC) money transfers:
“This is a new and unique moment in the history of Bitcoin, where innovation generates network activity without the classic volume transfer of coins for monetary purposes.”
Glassnode explains that the Ordinal surge has contributed to a “short-term uptick in recent Bitcoin network usage” that has brought many “new active users” with non-zero BTC balances to the network:
“The main source of this activity is due to Ordinals, which instead of carrying a large payload of coin volume, instead of carrying a large payload of data and new active users,” said Glassnode.
“This reflects the growth in the user base […] of use beyond investment use cases and monetary transfers,” he added.
A new player competes for the block space
Glassnode notes that Ordinals are now competing for demand-side blocks, which is “putting upward pressure on the fee market,” but notes that this has not led to an increase in Bitcoin transaction fees.
According to Glassnode, since Ordinals launched on January 21st, the upper range of the average Bitcoin block size has increased from 1.5-2.0 MB to 3.0-3.5 MB in a matter of weeks.
However, this does not lead to an increase in costs. While there were a few short spikes, Glassnode stated that “the new lower limit transaction fee required for blockchain inclusion” has been reached since Ordinals made their mark on January 21.
The application of the technology behind the Ordinal protocol was enabled by the Taproot soft fork, which took effect in November 2021. Bitcoin Ordinal was launched on January 21.
Through the use of the Ordinals numbering scheme, Bitcoin users can determine the content of the agreement for satoshis – the smallest denomination of BTC – which enables them to inscribe Bitcoin-native, nonfungible tokens (NFT)-like images.
There are more than 78,400 images and videos like NFT written so far.
The impact of images like NFTs on Bitcoin has not come without controversy.
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Some prominent “Bitcoiners” such as Blockstream CEO Adam Back have recently expressed their displeasure with the Ordinals protocol, suggesting that it deviates from Bitcoin’s purpose as a peer-to-peer electronic cash system.
However, others are more open to the idea. Bitcoin Bull Dan Held has asserted on multiple occasions that Ordinals bring more “financial use cases to Bitcoin.”