Key Points:
- Inscriptions on the Bitcoin blockchain are causing a backlog of unconfirmed transactions.
- High fees and congestion are affecting Bitcoin users, leading to discussions about scalability.
- The crypto community is debating the role of the Lightning Network in resolving this issue.
At present, the Bitcoin network is grappling with a staggering 393,000 unconfirmed transactions, some dating back to April. Interestingly, this backlog is receiving mixed reactions.
Throughout its history, the Bitcoin network has frequently witnessed extended queues of transactions awaiting confirmation, leading to skyrocketing fees and widespread concern within the cryptocurrency community. Presently, the network is encountering yet another episode of congestion, as observed by Bitcoin on-chain analyst Willy Woo.
Read Also: JPEX Scandal Sparks Hong Kong’s Vigilance on Unlicensed Cryptocurrency Exchanges
Woo reported, “The mempool is now at the highest point in the history of BTC since data was recorded,” in an interview with Decrypt.
So, what is the root cause of this situation?
James Check, the lead analyst at Glassnode, took to Twitter to explain that a surge in demand for blockspace is attributable to inscriptions. These inscriptions, popularized by Bitcoin Ordinals, are reminiscent of NFTs and allow users to “inscribe” various data onto the blockchain, including images, text, or audio.
Check noted that while fees are not as exorbitant as during the Ordinal craze of early May, the network has failed to clear its mempool since then.
To comprehend the concept, imagine a mempool as the blockchain equivalent of a waiting room, where users submit Bitcoin transactions (or inscriptions) and await selection by a miner to be recorded in the public ledger.
As of the time of writing, there are approximately 393,000 unconfirmed Bitcoin transactions.
Check elaborated that inscriptions are exerting what he terms as “baseload pressure,” constituting 50-60% of confirmed transactions and contributing significantly to the congestion.
“Inscriptions fill the void left by empty blockspace and have been doing so for 5 months,” he observed, emphasizing that these types of transactions are “sensitive to high fees but are willing to utilize affordable blockspace.”
For some, the influx of inscriptions translates to more transactions and, consequently, higher fees, which is welcomed news.
Woo, who disclosed that he is currently paying $7.50 to move BTC, expressed his preference for high transaction fees.
“One day, the network subsidy will run out, and Bitcoin will rely solely on the fee market,” he opined, alluding to the contentious debate over Bitcoin’s security budget.
Woo further highlighted that the Lightning Network, one of Bitcoin’s Layer-2 scaling solutions, will need to play a more significant role, but its viability for smaller transactions is compromised at these elevated fee levels.
“We are navigating a delicate balance,” he told Decrypt. “If fees are too low, we might make changes to restore capacity, but this could compromise the network’s long-term security. If fees are too high, the Lightning Network may lose its decentralized and secure attributes for everyday transactions.”
The on-chain analyst acknowledged that significant advancements have been made in enhancing blockchain efficiency since the 2017 congestion episode when transaction fees resembled the current levels.
“Inscriptions emerged during the bear market, and fees are already at $7.50,” he posed a thought-provoking question, “What will happen during the bull market?”
Woo concluded with a somewhat ominous forecast, suggesting that while Lightning may absorb some of the load, payment frauds might become more prevalent as a consequence.
The duration of the current congestion remains uncertain, but Woo advises caution, stating, “However long this congestion persists today is anybody’s guess.
_____________________________________________________________________________________________________
Follow us on Google News, Telegram, Twitter, and Facebook for the latest insights and discussions in the world of Crypto News.
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
