Here’s How Bitcoin Inscriptions Have Changed Miner Economics

Here’s how the Bitcoin inscriptions have affected miner economics (particularly in terms of the transfer fees) since they emerged on the scene.

Bitcoin Miners Have Made 1,761 BTC In Transaction Fees From Inscriptions

The “Inscriptions” here refer to a way of directly adding or inscribing data into the Bitcoin blockchain. Since its emergence earlier in the year, this new tech has found various applications on the network, essentially turning the BTC blockchain into more than just a P2P transfer network.

The Inscriptions can be created using any type of data. Some of the most popular types of Inscriptions on the blockchain have been text, audio, video, and image.

At the start, the Inscriptions mostly saw use as non-fungible tokens (NFTs) on the BTC chain, but as time has gone on, their usage has evolved. The BRC-20 tokens, for example, are fungible tokens created using the Inscriptions protocol that burst into popularity not too long ago.

Since the Inscriptions appeared on the scene, they have gone through phases of explosive popularity. As the Inscription movements are like any other transactions on the blockchain, they naturally influence all the metrics related to transfers. Their high usage, thus, has meant that the network has been more congested than usual in the last few months.

Generally, in periods of high traffic on the blockchain, the transaction fees register a surge. This is because the miners only have a limited capacity to handle transfers on the network, so when a large amount of them are taking place at once, they prioritize transactions with the highest fees.

Senders who want their coins to reach their destination as soon as possible are naturally incentivized to attach higher and higher fees in this setup, which can result in the average fees on the network shooting up.

The transaction fees are one of the two main revenue streams for the Bitcoin miners (the other one being the block rewards), so it’s not surprising that the Inscriptions have been a boon for their incomes.

Here is a chart that shows the trend in the cumulative fees that the BTC miners have earned from the Inscriptions since they first arrived on the network:

Looks like the value of the metric has slowed down in recent days | Source: Glassnode

As displayed in the above graph, the image-based Inscriptions were responsible for most of the total cumulative Inscription transaction fees during the early months of the tech.

With the BRC-20 token’s emergence, however, the text-based Inscriptions took over. From the graph, it’s visible that the growth in fees due to this type of Inscriptions was much more rapid than what the image NFTs observed.

In all, the cumulative fees from these transfers currently stand at 1,761 BTC (almost $53 million at the current exchange rate), which is equal to 22% of the total fee revenue that Bitcoin miners have made during this period. This means that the portion of revenue for BTC miners made up of fees from transactions involving inscriptions is on the rise.

BTC Price

At the time of writing, Bitcoin is trading around $29,900, up 21% in the last week.

The asset seems to have registered a sharp jump recently | Source: BTCUSD on TradingView

Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, Glassnode.com