3 Things Have Gone Wrong 

The numerous benefits of Bitcoin Ordinals (i.e. Ordinal inscriptions, Ordinal NFTs, Bitcoin NFTs) have made them popular in the Bitcoin community. This is evident by the 12M inscriptions made so far. One reason for their popularity is ease of creation. No-code tools like Gamma.io let you create Bitcoin Ordinals and trade them within the larger Bitcoin ecosystem.

And even though Ordinals are evolving for the better – like the recent development of BRC-721E that transforms Ethereum non fungible tokens into Ordinal NFTs on the Bitcoin blockchain – fewer inscriptions are being made (Figure 1). 

In this article, we will be discussing some of the reasons why Bitcoin Ordinals have been seeing a drop in activity since April that saw the highest number of inscriptions ever made.

1. The case of the “cursed” inscriptions

The topic of “cursed” inscriptions was first reported¹ by Casey Rodarmor in late April. The issue involves the misuse² of Bitcoin scripts³. We won’t delve into the technicalities. But the main idea was that users inscribed +70,000⁴ individual satoshis with negative values.

Ordinal protocol recognizes inscriptions by assigning each satoshi – the smallest unit of bitcoin – with a number. That’s where the term “ordinal” comes from: assigning a number to each item in a list. However, if a satoshi has a negative identification number – either by chance or design – the protocol can’t recognize it. It will forever be on the Bitcoin network. But it will never be tradeable.

And that was the case from April until June 6th, when the latest Ord update was released⁵ that would index negatively-numbered-cursed-inscriptions positively, and thus “bless” them. But for almost two months, users who had paid an inscription fee and network fee had these dormant, decorative inscriptions that they couldn’t trade, liquidate, nor include in Bitcoin transactions.

The Ordinals are a new development and edge cases and loopholes are to be expected. As one of the technical members of the Ordinals team says (Figure 2), the project “[is] a marathon, not a sprint” and future hiccups could be expected.

2. Bitcoin network moving away from being a pure P2P system

As Coin Telegraph puts it⁶

Bitcoin now suffers from many of the same problems that have bedeviled Ethereum for years, including scammy memecoins and ****coins, NFTs of monkey pictures hogging block space and skyrocketing transaction fees.

The Bitcoin blockchain, and its crypto namesake, were meant for pure, straightforward peer-to-peer financial transactions. However, the 5 main developments that brought NFTs to the Bitcoin blockchain, namely:

1. Colored coins
2. OP_Return function
3. Segwit upgrade
4. Taproot upgrade
5. Ordinals protocol

Have given the crypto community the ability to store and trade digital art on Bitcoin, a feat formerly only possible on Ethereum, Solana, Polygon, and other blockchains. This has upset Bitcoin purists and Bitcoin maximalists who want to preserve Bitcoin blockchain for only P2P transactions. 

The case against Ordinals revolves on two axis:

2.1. Bitcoin ordinals have increased transaction fees

A benefit of making Bitcoin a hospitable blockchain for Bitcoin native JPEGs, videos, games, and memecoins is attracting a larger audience. This:

• Brings more people to Bitcoin
• Incentivizes them to start trading
• Pushes them to bid more for the limited block space

One side-effect is miners charging a higher minimum fee rate for processing Bitcoin transactions. Figure 3 shows how the total transaction fees have steadily been rising since March 2023, when Ordinal NFTs were introduced, with no slowing down. Situation was so dire that in May 2023, the total transaction fees exceeded bitcoin’s daily market price, which hadn’t happened since 2017.

One argument in favor of higher transaction fees is that it improves the bitcoin security model, because it can encourage developers to secure the network as it increases their revenue. But that’s an argument for another day.

But as Mati Greenspan, Quantum Economics founder, puts it⁷: 

I spoke to one miner yesterday who said his revenue has doubled, which is nice, especially ahead of the halving, so it’s good for miners, but it’s terrible for the countries of Nigeria and El Salvador, for example, where, suddenly, the average cost to send a transaction is $30. The dream of financial inclusion on Bitcoin has been temporarily postponed.

And while the average transaction fee has gone back to $5 from $30 in May, this issue raises an important point regarding the moving of Bitcoin away from pure financial services.

2.2. Bitcoin blockchain is congested and overflown

More people interested in something results in congestion and more people waiting in line (Figure 4).

The average confirmation time – the time it takes for transactions to go through and be included in a block – has been increasing since late last year. The average time now is about 25 hours. That’s in stark contrast to what it was a year before to date: 30 minutes (Figure 5).

Another way to look at it is to consider the number of transactions that are in the pipeline to be confirmed, or the mempool transaction count. Figure 6 shows that the number of transactions included in the backlog have been increasing since November 2022, from over 20K to almost 150K now.

Lastly, we should consider the Bitcoin block space, which has increased from 1.4MB in June 2022 to almost 1.8MB today (Figure 7). Bitcoin block space is the finite capacity each chain has to include a number of transactions in it. But capping that limit, and waiting for new blocks to be mined, and bid to have your transactions on them, exacerbates the issues we’ve been discussing: higher transaction fees, longer waiting times, and more congestion.

For more on Ordinal Inscriptions

To learn more about Ordinal Inscriptions, read:

1. “Cursed Inscription Tracking Issue #2045.” Github. April 25, 2023. Retrieved on June 19, 2023.
2. “The Debate Around ‘Cursed’ Ordinal Inscriptions.” BitcoinMagazine. May 31, 2023. Retrieved on June 19, 2023.
3. “Script.” Wikipedia. Retrieved on June 19, 2023.
4. “@Leonidas NFT” Twitter. June 4 , 2023. Retrieved on June 19, 2023.
5. “@raphjaph.” Twitter. June 4, 2023. Retrieved on June 19, 2023.
6. “Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?“Coin Telegraph. May 16, 2023. Retrieved on June 19, 2023.
7. “Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?“Coin Telegraph. May 16, 2023. Retrieved on June 19, 2023.

Bardia is an industry analyst at AIMultiple. His bachelor’s degree is in economics from UC Davis, and his master’s in economics and finance from Bogazici University.

He primarily writes about RPA and process automation, MSPs, Ordinal Inscriptions, IoT, and to jazz it up a bit, sometimes FinTech.