Glassnode noted that for the first time in Bitcoin’s history, the network was being used for non-monetary purposes.
According to crypto analytics platform Glassnode, the launch of non-fungible bitcoin tokens (NFTs) — known as ordinals — has pushed the number of non-zero bitcoin addresses to a new all-time high of 44 million.
In a Feb. 13 report, Glassnode explained that for the first time in Bitcoin’s 14-year history, some network activity is being used for purposes other than peer-to-peer Bitcoin (BTC) fund transfers:
“This is a new and unique moment in Bitcoin history, where innovation generates network activity without the classic transfer of coin volume for monetary purposes.”
Glassnode explained that the growth of ordinals has contributed to a “short-term spike in usage of the Bitcoin network lately,” which has attracted many “new active users” to the network with non-zero BTC balances:
“The main source of this activity is ordinal numbers, which carry a larger amount of data and new active users instead of a large amount of coin volume,” Glassnode said.
“This describes the growth of the user base […] through usage beyond typical investment and money transfer use cases,” it added.
A new player competes for a spot on the block
Glassnode noted that ordinals are now competing for block space demand, which is “generating upward pressure on the fee market,” but noted that this has not resulted in a significant increase in bitcoin transaction fees.
According to Glassnode, since the launch of Ordinals on Jan. 21, the upper range of the average Bitcoin block size has increased from 1.5-2.0 MB to 3.0-3.5 MB in a few weeks.
However, this did not increase the fees. Although there have been short-lived spikes, Glassnode stated that the “new lower transaction fee required to activate the block” has been achieved since Jan. 21.
The technology applications behind the Ordinal protocol were made possible by the Taproot soft fork, which went live in November 2021. Bitcoin Ordinals was launched on January 21st.
Using an ordinal scheme, bitcoin users can assign any content to a satoshi — the smallest denomination of BTC — allowing them to enter bitcoin-native non-fungible tokens (NFTs).
To date, more than 78,400 NFT-like images and videos have been recorded.
However, the impact of NFT-like imagery on Bitcoin has not been without controversy.
Related: Bitcoin Is Already In “Another Bull Cycle” – Pantera Capital
Some high-profile “bitcoiners,” like Blockstream CEO Adam Back, recently voiced dislike for the Ordinals protocol, suggesting that it deviates from Bitcoin’s purpose as a peer-to-peer electronic cash system.
However, others were more open to the idea. Bitcoin bull Dan Held has repeatedly claimed that ordinals bring more “financial use cases” to Bitcoin.
