Bitcoin's BRC-20 Surge Causes User Rush for Lightning and Other Options

On Sunday night, a fortunate miner earned transaction fees worth 6.701 bitcoins (BTC), equivalent to almost $200,000, surpassing Bitcoin's existing block subsidy of 6.25 BTC. This highly unusual event highlights the impact of the Ordinals protocol's recent surge in blockchain activity, which has resulted in skyrocketing costs for users.

In the latter part of last year, Ordinals introduced the concept of 'inscriptions' that allowed users to add arbitrary content such as text or images to sequentially numbered satoshis or 'sats', which are the smallest units in Bitcoin. This resulted in the creation of unique, non-fungible tokens (NFTs). Currently, Ordinals is also being utilized for minting BRC-20 tokens, which, in essence, are fungible tokens.

The rapid surge in popularity of these new tokens has come at a significant expense. They have congested the Bitcoin network and pushed it to its operational limits, providing a tangible test of the blockchain's ability to scale quickly in the real world. This scenario has offered insights into how the world's first and largest blockchain might handle the need for rapid scalability.

The fees associated with sending coins are skyrocketing, leading to longer transaction wait times in the queue. This has prompted some users and exchanges to explore alternative options, including the Lightning Network. The Lightning Network is a layer 2 scaling solution that aims to enhance the speed and affordability of Bitcoin transactions.

“Can anyone explain how I'm going to onboard people with these fees?” tweeted Anita Posch, Bitcoin educator and founder of Bitcoin for Fairness. “I'm mostly onboarding people in Africa. They don't have the privilege like you to pay these high fees. They really need BTC, while you're just playing around.”

BRC-20 tokens are essentially inscriptions of JavaScript Object Notation (JSON) data. These are code snippets that allow the transfer of data structures across various platforms. As the JSON inscriptions are executable code, they can be programmed to create vast quantities of tokens by minting small, block-sized batches at regular intervals. This innovative approach effectively generates fungible tokens using a non-fungible protocol.

The ability to mint vast quantities of tokens out of thin air is the driving force behind the frenzy and unease among users of the blockchain. Recent blocks have been inundated with BRC-20 transactions, causing transaction fees to soar to around $20 per transaction, an 800% increase from the typical fee range of $1-2 per transaction observed in most of 2022.

The sudden spike in fees sent shockwaves throughout the Bitcoin ecosystem, leading the world's largest cryptocurrency exchange, Binance, to temporarily suspend bitcoin withdrawals due to fee miscalculation. This surge in fees also caused frustration and distress in certain regions of Africa and Latin America, where some residents rely on bitcoin for day-to-day transactions.

Binance has announced that it is currently working on incorporating Lightning Network, in response to the recent surge in Bitcoin transaction fees.

However, even the Lightning Network necessitates an initial on-chain transaction for creating a payment channel, and according to Posch, the expenses have risen so high that many people are unable to afford even a single transaction.

“Can't use on-chain, can't open channels,” Posch tweeted. “Makes custodial Lightning the only option. And all that because some people think it's fun to break Bitcoin.”

After the recent NFT minting event on the Bitcoin network, the concern about Bitcoin's potential vulnerability to disruption has become a common topic on Crypto Twitter.

While Posch is suggesting that mischievous hackers are enjoying experimenting with the boundaries of Bitcoin, some people have taken a more conspiratorial stance by alleging, without any proof, that the BRC-20 trend is, in fact, a deliberate assault on the most prominent blockchain in the world.

Source Coindesk