Bitcoin’s popularity has been both a boon and a curse for the digital currency. On one hand, its decentralized nature and limited supply have made it a favorite among investors seeking to diversify their portfolios. However, as demand for Bitcoin transactions has increased, so too have the network’s congestion and fees.
According to a recent report by CryptoQuant, a surge in block space demand is due to the minting of BRC-20 memecoins on the BTC blockchain. Unlike other token standards, BRC-20 doesn’t utilize smart contracts and operates only with wallets supporting the Bitcoin blockchain.
As a result, the average fee per Bitcoin transaction has skyrocketed, reaching a high of $29 on May 9. Data from Bitinfocharts shows a similar trend, with average transaction fees jumping to $31 on May 8 compared to around $19 the day prior. On May 8, the total fees per block even temporarily exceeded the block subsidy reward of 6.25 BTC for the first time since 2017.
Despite the backlog, the number of Bitcoin transactions has hit a new all-time high. Bitinfochart data recorded a top of 534,000 Bitcoin transactions on May 9, although the figure may be higher as the site has recorded two higher spikes over 600,000 daily transactions this month using raw values. Blockchain.com has also confirmed that the average transactions per block are at an all-time high of 3,778.
However, the surge in demand has resulted in a backlog of 400,000 unconfirmed transactions, according to Mempool Space, which is keeping transaction prices elevated. Bitcoin core developers are now mulling to take action against BRC-20 tokens and Ordinals, which they consider as network spam. The number of ordinal inscriptions has almost doubled from 2.5 million to 4.78 million in just over a week.
Despite the congestion, it’s good news for miners as profitability or hash price has surged 66% since the beginning of the month. On May 9, the total market capitalization of BRC-20 tokens even surpassed $1 billion.
Bitcoin’s scalability and fees have been a long-standing issue for the digital currency, and this recent surge in demand only highlights the need for a solution. While developers may take action against BRC-20 tokens, it remains to be seen how this will affect the network’s congestion and fees in the long run.
