Published: July 12th, 2023
Bitcoin Ordinal NFTs continue to expand their network presence, approaching an all-time high for inscriptions in one 24-hour period, without spiking transaction fees.
According to crypto data analytics firm Dune, the past weekend saw a surge in activity. On Sunday 9th July the network chalked-up the second-busiest day in Ordinals history with 385,910 inscriptions. That figure is just below the all-time-high reached on 6th May 2023, when more than 400,000 new inscriptions were recorded.
Despite the deluge, Dune's data says Bitcoin transaction fees have been largely unaffected. On Sunday, the busiest day for inscription activity, BTC fees were just 1.052 USD.
With inscriptions rising on a parabolic curve, Dune analysts say the stability in fee levels is surprising. Users haven't paid more than 2.4 USD a day during the month of July, and the network hasn't seen a daily fee count surpass 6 USD since early June.
Ordinal Inscriptions are similar to more established Ethereum NFTs but tailored to the needs of the Bitcoin blockchain. They're ‘inscribed’ on a Satoshi, the lowest BTC denomination by writing data oonto the witness of a Bitcoin transaction, an element introduced in 2017's SegWit network upgrade.
Dune says the most popular type of Inscription currently is textual content, accounting for more than 13 million inscriptions or 81 per cent of the total inscribed to date.
This past weekend's near all-time high may have been sparked by the rapid growth in Ordinal-related projects and the buzz they generate on crypto twitter and other forums.
In February 2023, Ethereum experienced the exact opposite effect on its ‘gas’ transaction fees when they rose sharply after a spike in NFT trading activity.
Figures from blochain analytics firm Glassnode showed that the median cost of a ‘gas fee’ (Ethereum's label for the transaction fees it charges to keep network congestion in line) climbed steadily to between 10-20 gwei over the previous nine months.
In February 2023 the figure rose sharply to 37 gwei, an increase that was even higher than peaks which occurred in the aftermath of big events like the FTX collapse in November 2022 and Binance's difficult week in December 2022. In those periods Gas fees reached 36 gwei and 24 gwei respectively.
‘Since gas fee demand (rose) in smaller steps for most of February, it seems that we are seeing the first indicators that Ethereum network activity is returning to normal,’ wrote Glassnode analysts.
Gas fees ebb and flow in line with network demand, a bit like the surge pricing used by apps like Uber. For crypto traders it means that transaction costs go up when more transactions are attempted to be added to a new Ethereum block. In February 2023, rising user activity looked to be driven by traders taking place on Ethereum's NFT market.
The gas fees for new Ethereum NFT transactions jumped by 96 per cent for two months in a row, Glassnode said, touching levels last reached at the peak periods achieved during the 2021-2022 NFT frenzy. Much of that trading happened on the emergent Blur marketplace, which surpassed OpenSea, the previous leader, in overall NFT trading volume in January of this year.
‘The arrival of Blur and its surging popularity has increased demand for Ethereum block space, leading to higher fees for validators and more ETH being burnt,’ added Glassnode.
An NFT is a token on the blockchain that provides digital proof that someone owns an asset, often a digital item like a unique avatar or video game element. In some cases, the NFT denotes proof of ownership over a physical / real world artwork or collectible. The NFT market hit USD 25 billion in trading volume in December 2022, growing from roughly USD 5 billion in January 2022.
Other reasons for the February 2202 rise in Ethereum NFT activity would factor in the launch of new collections by well-known NFT brands like Yuga Labs, which released its Dookey Dash game that month, alongside the latest version of its popular Doodles collection.
In Glassnode's analysis, Ethereum's network adoption rate in Q1 2023 was comparatively low despite the NFT trading uptick. The number of new addresses created was 40 per cent beneath the 2022 peak. February's rise in NFT activity was largely driven by existing NFT holders and didn't point to a rise in NFT market liquidity.
Fee income growth was also uneven across the Ethereum ecosystem. Glassnode said that competition between challenger Blur and incumbent OpenSea was affecting the amount of VC interst in new NFT projects. In the past, these would have depended on royalties obtained in secondary NFT markets for much of their revenues.
While every well-known NFT collection saw its valuation decline during 2022's crypto bear market, the CryptoPunks collection managed to defy the wider trend. After a pair of multi-million-dollar sales in July 2022, the floor price for a CryptoPunks NFT spiked in one notable seven-day period.
On secondary markets in late July 2022 the floor price jumped to over USD 100,000, the first time it had reached such a high since the crypto crash took hold in Spring 2022. Data from NFT Price Floor had the floor price for CryptoPunks at 84.79 ETH, or about USD 112,000.
That meant the opening price for a CryptoPunks NFT jumped by more than 30 per cent in seven days.
The rising value of Ethereum, up 27 per cent over the previous week, was partly to blame. However, when measured against ETH, the CryptoPunks floor beat Ether's rise by nearly 26 per cent over the previous 30 days.
It didn't set off a market-wide uptrend for high-value NFTs, however. A-list collection Bored Ape Yacht Club, for example, saw its ETH floor price fall by five per cent the same week.