23rd May 2023 – (New York) The Bitcoin blockchain has seen an unprecedented surge in daily transactions this month, reaching an all-time high of 682,000, according to data from Glassnode. This figure is almost 40% higher than the previous peak in 2017. As a result, Bitcoin’s dominance, or its share of the overall cryptocurrency market, has grown to 44% from 38% at the start of the year.
What’s driving the surge?
The answer lies with the emergence of BRC-20, the first class of crypto tokens to be built on the Bitcoin blockchain, besides Bitcoin itself. Nearly 25,000 of these experimental coins have already been minted this year, sending transactions through the roof.
“BRC-20 tokens are a phenomenon we haven’t seen before,” said Gordon Grant, co-head of trading at Genesis trading.
It’s primarily due to the creation of these tokens that the average daily transactions over seven days now stand at over 531,000, nearly twice as high as a month ago, according to Blockchain.com data.
This new class of crypto has no specific use beyond speculation, similar to memecoins. Yet its nascent popularity points to interest in Bitcoin not just as a store of value or payments method but as the foundation for developing new coins and applications – previously considered the domain of more modern blockchains such as Ethereum and Solana.
Some investors and developers view Bitcoin’s blockchain asa safer long-term basis for creating tokens and applications in the wake of the crypto carnage that followed the collapse of high-profile firms like FTX and a general flight from riskier assets.
“People have seen what is possible with other blockchains and they want it on Bitcoin. As the oldest network, Bitcoin has a track record that people can trust,” said Alex Miller, CEO at Bitcoin developer network Hiro.
Despite this, the BRC-20 frenzy has been volatile. The total value of these tokens – which are typically traded in secondary markets, particularly decentralized exchanges – exceeded $1 billion in early May, but has since fallen back to $446 million, according to tracker BRC-20.io.
As Bitcoin’s blockchain wasn’t originally developed to support a crypto ecosystem, unlike Ethereum and Solana, BRC-20 tokens are created using ordinal theory, which allows data to be inscribed on each satoshi – the smallest denomination of Bitcoin, or one hundred millionth.
“There isn’t much utility when it comes to BRC-20 tokens and Ordinals,” said CJ Reim, contributor at blockchain firm CoreDAO, though he sees the trend as “promising” in terms of interest in building products on the Bitcoin blockchain.
The race to create these new coins hasn’t had a significant impact on the price of Bitcoin, which has been trading under $30,000 since mid-April.
The rapid creation of BRC-20 tokens hasn’tbeen without contention, with detractors saying the issuance of these tokens has made it more difficult for users who want to use Bitcoin for its originally intended purposes.
One of the challenges that Bitcoin faces is the soaring gas fees, or transaction costs, on its blockchain. The total dollar-denominated fees paid per day have touched near a new all-time high of $17.8 million per day, according to Glassnode data. The median transaction fee spiked as high as $30.91, compared to a range of 90 cents and $4.23 between January and May 1, as shown by Blockchain.com data.
The network has also slowed considerably due to the congestion. The congestion was so acute that the world’s largest crypto exchange, Binance, had to briefly pause Bitcoin withdrawals on May 7.
“Although congestion has eased somewhat, it is still elevated, and at its peak, users were waiting over 30 hours for transactions to be confirmed,” said Nauman Sheikh, head of treasury management at digital asset investment manager Wave Digital Assets. “This has pushed the limitations of Bitcoin’s technology.”
Despite these challenges, the emergence of BRC-20 tokens has sparked renewed interest in Bitcoin’s potential as a blockchain for developing new coins and applications. As a result, Bitcoin’s blockchain is now attracting investors and developers who view it as a safer long-term basis for creating tokens and applications.
While the BRC-20 frenzy has been volatile, it has also highlighted the importance of maintaining strong securitymeasures around high-profile blockchain networks. The surge in daily transactions on the Bitcoin blockchain, driven by the creation of BRC-20 tokens, illustrates the need for constant vigilance and preparation in the cryptocurrency ecosystem.
The emergence of BRC-20 tokens on the Bitcoin blockchain has opened new doors for investors and developers, who see the potential for the network to be the foundation for developing new coins and applications. This development has sparked renewed interest in Bitcoin’s blockchain and its potential as a safer long-term basis for creating tokens and applications, especially in the wake of the crypto carnage that followed the collapse of high-profile firms like FTX.
However, the rapid creation of BRC-20 tokens has had its challenges. Detractors argue that the issuance of these tokens has made it more difficult for users who want to use Bitcoin for its originally intended purposes, as gas fees or transaction costs on the Bitcoin blockchain have soared over the past month.
The congestion was so acute that the world’s largest crypto exchange, Binance, had to briefly pause Bitcoin withdrawals on May 7. The median transaction fee spiked as high as $30.91, compared to a range of 90 cents and $4.23 between January and May 1, as shown by Blockchain.com data.
Despite these challenges, interest in building products on the Bitcoin blockchain continues to grow. The BRC-20 frenzy has been volatile, with the total value of these tokens exceeding $1 billion in early May, but has since fallen back to $446 million, according to tracker BRC-20.io.