Memecoins and NFTs erupt on the Bitcoin blockchain, triggering a ‘seismic shift’ for miners

The Ordinals created a path to uses of the Bitcoin network that didn’t exist before. GT

The outbreak of mymcoins and non-fungible tokens on the Bitcoin blockchain has reshaped the revenue profile of miners and raised questions about how long the disruptions will continue.

New programs known as Ordinals paved the way for the rise of NFT tokens and meme on the network this year. Galaxy Digital Holdings Ltd says the Bitcoin NFT ecosystem could reach $4.5 billion by 2025, while around 25,000 memecoins have been registered on the blockchain since its debut in March.

The NFT and meme-token craze has spurred record transactions and unexpected fees for miners, who run Bitcoin-enabled computers. At one point in May, transaction fees made up more than 40% of the revenue, while miner income is usually dominated by the new bitcoin they get to secure the blockchain.

“The Ordinals Protocol has spurred a seismic shift in the bitcoin mining landscape,” said Jihan Wu, Chairman of Singapore-based Bitdeer Technologies Group, one of the largest crypto mining companies through computer power.

Ordinal values ​​and a cryptocurrency recovery eased pressure on mining margins caused by last year’s rout of digital assets and soaring energy costs. But bitcoin proponents argue that the Ordinals phenomenon clogs the network and interferes with the cryptocurrency’s larger store-of-value and payments functions.

The average fee per transaction on the Bitcoin blockchain started in April at $2.80, reached $30 on May 8 and was revised to $6 on May 18, according to data from CryptoQuant. Total fee income attributable to The Ordinals is approximately $37.4 million, according to data compiled by Dune Analytics AS.

Developer Casey Rodarmour Ordinals, a software protocol that allows users to record digital content such as videos, images, and text on satoshis, has created the smallest unit of Bitcoin. There are 100 million satoshis in one bitcoin.

Then Rodarmor’s innovation allowed the pseudonymous blockchain analyst to be called Domo to develop the Bitcoin Request for Comments – or BRC-20 – standard, which led to an explosion of memecoins.

The durability of the sudden enthusiasm for NFTs, or digital collectibles, and speculative tokens on the Bitcoin blockchain remains an open question. The market cap of memecoins was trending towards $1 billion earlier in May, but has since fallen to around $582 million, according to BRC-20.io figures.

Carlos Gonzalez Campo, Research Analyst at 21Shares AG, said BRC-20 tokens have no use.

The basic idea may be that the Ordinals have created a path to uses of the Bitcoin network that did not exist before.

“While the Mymcoin craze over Bitcoin is likely to subside eventually, valuable use cases will emerge from the mess, such as using Bitcoin as a layer that provides data and stores important documents that require permanent preservation,” said Sami Kassab, research analyst at Mesari.

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The continued boost in transaction revenue can help sustain the Bitcoin network in the long run by keeping miners engaged. Transactions will be the only source of revenue by around 2140, when bitcoin is set to hit its 21 million cap, and no new coins will be issued in exchange for securing the blockchain.

For now, The Ordinals is helping fuel renewed investor enthusiasm for bitcoin miners. The 20-member MVIS Global Digital Asset Mining Index is up 110% so far in 2023, outpacing Bitcoin’s advance by 74%.

Colin Harper, head of content and research at crypto mining service provider Shorter Technologies, said the arrangement’s implementation “completely reframes how people think about mining profitability.”