Ordinals critics argue that inscriptions, particularly BRC-20 tokens, are causing a denial of service attack on regular Bitcoin (BTC) transfers. However, on-chain analysis conducted by lead Glassnode analyst James Check challenges this claim. According to Check, the majority of Bitcoin block space is still filled with normal monetary transactions, with inscriptions simply occupying any remaining space. Glassnode’s data reveals that inscriptions and monetary transfers each constitute approximately 50% of total Bitcoin transactions. Interestingly, though, inscriptions prove to be more efficient in terms of block space utilization. In fact, despite occupying less than 10% of block data size, inscriptions generate between 20% and 40% of the network’s total fees. Check emphasizes that inscriptions actually benefit Bitcoin by providing value, fees, and efficient use of block space.
Initially, Bitcoiners understood inscriptions as a way to inscribe weighty, image-based non-fungible tokens (NFTs) on the blockchain. However, the introduction of the BRC-20 token standard ushered in a “second wave” of tiny, text-based inscriptions. While these inscriptions may be smaller in size, they occur at a much higher frequency, resulting in the significant expansion of Bitcoin’s unspent transaction output (UTXO) set and higher transaction fees. A Glassnode report from September highlighted the impact of the BRC-20 token named SATS, which minted millions of Bitcoin UTXOs over several months. Recently, Binance even announced its plans to list trading pairs for SATS. According to the same report, text-based inscriptions can be seen as “filler” for blocks, similar to soft packing material in shipping crates. They occupy available block space in less active blocks but are displaced by more urgent monetary transfers.
James Check dismisses criticisms of inscriptions from Ordinals critics as purely ideological and subjective. He reminds them that Bitcoin operates on a set of consensus rules that are objective and not influenced by personal feelings or values. This challenges the notion that inscriptions are spam or exploiting a bug in Bitcoin’s code. Bitcoin Core developer Luke Dashjr has previously labeled Ordinals transactions as “spam,” further fueling the debate. However, Check’s analysis suggests that inscriptions serve a purpose in the Bitcoin ecosystem and contribute to the overall efficiency of block space utilization.
Critics of inscriptions in Bitcoin who claim that they are disrupting regular transactions and constitute a denial of service attack may need to reevaluate their stance. On-chain analysis conducted by Glassnode’s James Check reveals that inscriptions and monetary transfers share an equal portion of total Bitcoin transactions. Furthermore, inscriptions prove to be more efficient in terms of block space utilization, generating a significant portion of the network’s total fees. The evolution of inscriptions from image-based NFTs to text-based inscriptions signifies a change in the way inscriptions are used in the Bitcoin ecosystem. While they may contribute to increased transaction fees and expanded UTXOs, they also provide value and pay miners. It is essential to consider the objective consensus rules of Bitcoin and analyze the data before dismissing inscriptions as spam or exploiting a bug in the system.
