Over the years, Bitcoin’s network has been no stranger to long lines of transactions waiting to get confirmed, which forces fees to skyrocket and triggers alarms across Crypto Twitter and beyond. And the network is currently going through another bout of congestion, observed Bitcoin on-chain analyst Willy Woo.
“The mempool is now at the highest point in the history of BTC since data was recorded,” he told Decrypt.
What’s going on?
James Check, lead analyst for Glassnode, posted on Twitter earlier this week that there has been an explosion in blockspace demand due to inscriptions. These were popularized by Bitcoin Ordinals, and like NFTs, they allow users to “inscribe” things onto the blockchain–whether that’s images, texts, or audio.
He wrote that fees are not as high as they were during the Ordinal craze of early May, but the network has not been able to clear its mempool since.
Think of a mempool as a blockchain’s equivalent of a waiting room, with users sending Bitcoin in (or making inscriptions) and waiting for the transaction to get selected by a miner and inscribed into the public ledger.
At the time of writing, there are roughly 393,000 unconfirmed Bitcoin transactions.
Check went into detail explaining that inscriptions are providing what he calls baseload pressure, accounting for 50–60% of confirmed transactions and—in essence—the bloatedness.
“Inscriptions fill the void left by empty blockspace, and have done [so] for 5 months,” he wrote, adding that these types of transactions are “sensitive to high fees, but willing to buy cheap blockspace.”
Inscriptions means more transactions, bringing higher fees, which for some is welcome news.
Woo, who told Decrypt he is currently paying $7.50 to move BTC, said he wants high transaction fees.
“One day the network subsidy will run out and Bitcoin will be secured solely on the fee market,” he said, alluding to the controversial Bitcoin security budget debate.
Woo added that the Lightning Network, one of BItcoin’s Layer-2 scaling solutions, will have to step up, but at these high fees, is compromised for smaller transactions.
“We are really walking a middle path,” he told Decrypt. “Too cheap, and we make changes that bring back the capacity, then the network may be systemically compromised in decades ahead. Too expensive then the Lightning Network ceases to be decentralized and secure for everyday payments.”
The on-chain analyst did point out that developers “Have made huge jumps in improving the efficiency of the blockchain since the 2017 congestion when payment fees were very similar to whether they are right now.”
How long today’s congestion will last, however, is anyone's guess. That said, Woo is cautious.
“Inscriptions came during the bear market, and fees “are already $7.50.” He asks, “What will happen during the bull market?”
Woo concludes with a somewhat ominous prediction, “Lightning may take up some of the load, but also we'll start to see some payment frauds as a result.”