The underlying reasons for the outbreak of the Bitcoin inscription track and the inference of future development

Bitcoin inscriptions have been in the thick lately, from Ordinals to Atomicals. But I’m not going to talk about how ORDI or ATOM will rise, or whether there is technical value in the inscriptions. Instead, I want to combine some data to analyze the underlying reasons for the outbreak of the Bitcoin inscription track, and to infer the subsequent development of the Bitcoin inscription track.

The data source used in this article is OKLINK On-Chain Master.

First of all, let’s take a look at the BTC miners’ income in the last three months, on August 17, the contribution of on-chain fees accounted for only about 1.7%, and since November, it has gradually increased every day, until it reached a recent peak of 19.57% on November 10. The most significant impetus during this period was the inclusion of bns on the ORDI trading pair.

From this point of view, the outbreak of the Bitcoin inscription track has effectively increased the proportion of miners’ fee income. If the implementation sees that half a year later, in April 2024, the Bitcoin production cut will occur, and the block reward will be halved again. Without considering other factors, if the popularity of the current inscription is shifted to the future production reduction, then the proportion of fee income stimulated by the Bitcoin inscription track will reach 50%.

Miners are inevitably profit-driven, and after the foreseeable reduction in production, they will choose to buy new mining machines to increase their computing power in the past to ensure that their computing power advantage can bring more block rewards. However, Ni Da (X:@Phyrex_Ni) pointed out in an analysis article on November 9 that the current US bitcoin mining farms are losing money for nine months of the year, coupled with the process bottleneck of the semiconductor industry, the arms race of mining machine computing power has gradually slowed down.

As a result, profit-seeking miners are bound to look for another way to increase their income, and that is the Bitcoin inscription.

It can be seen from the brc20 token information of the oklink chain master that more than 50,000 tokens have been issued in the market less than a year after the launch of Ordinals. Combined with the mint of each token and the number of transactions, this is a rapidly expanding trading market. Such a trading market has greatly stimulated the increase in fee income of Bitcoin miners.

Whether it is Ordinals or Atomicals, or the unknown various dyed coin protocols behind it, they are essentially promoting the growth of miners’ income, and miners are also in urgent need of a new source of income, so the Bitcoin Inscription track will be honorably responsible for this. Miners will also become a major force in the Bitcoin inscription track.

However, it is worth noting that what miners need for the Bitcoin inscription track is a larger and more number of transactions, and the price rise and fall of the inscription is only a means to achieve it, and the increase in the proportion of fee income is the goal.

Based on the above positive attitude towards the expansion of the Bitcoin Inscription track, I deduce that the next thing that will explode in the Bitcoin Inscription Track should be the tool products minted by the inscription generation. For the vast majority of ordinary people, installing and configuring a full node by themselves and then going to the inscription is lower, but the operation threshold is also higher, and there are certain large-capacity requirements for the computer’s storage hardware.

Therefore, if you want to quickly expand the breadth of the inscription track, simpler and more convenient service-oriented tools are indispensable. For example, the leading exchanges have successively connected to the Bitcoin inscription and began to support the inscription minting and trading market. With the iteration of the product, the complexity of the operation related to the Bitcoin inscription will become less and less.

Finally, I would like to say that even though the track will get wider and wider, it does not mean that there is value investing. Personally, I would liken the current Bitcoin inscription to the era of ERC20 token spam around 2017. Before the ERC20 token achieved absolute dominance, it was common in the market to make a chain or fork a chain, and then issue a native token. Due to the different technical stacks of each public chain, the difficulty and speed of the exchange docking and listing are also different, until the ERC20 token has achieved a large-scale unification, allowing the exchange to quickly list and launch the currency to the market.

At present, Bitcoin Inscription is also in the initial era of this track, but eventually a unified protocol will emerge among various Bitcoin Inscription protocols, and finally seize the entire Bitcoin Inscription market. The current inscription track only solves the problem of the issuance of bitcoin ecological assets, and when there is a protocol or project that can solve the application scenarios of bitcoin ecological assets, that is the basis for value investment.