May 3, 2023 - Economy & Business

Bitcoin transactions are soaring, but it's not what you think

Data:; Chart: Axios Visuals
Data:; Chart: Axios Visuals

Bitcoin's confirmed transactions are exploding, but it's not because people are buying cappuccinos in Dubai with satoshis.

Why it matters: New experiments are running on the world's oldest blockchain. From the perspective of some, it's bringing new functionality — to others, it's a stress test enabling Bitcoin to experiment with how to handle outsize real demand, if such demand ever comes.

In the weeds: The new activities were enabled by a 2021 upgrade to the blockchain called Taproot, that is eating up block space.

  • Every transaction on the blockchain has to be paid for in bitcoin, which goes to bitcoin miners. More transactions mean more revenue, so miners must like these new products.

Details: The Ordinals protocol enables individual satoshis (the smallest unit of a bitcoin) to be inscribed with specific information, such that it can, for example, be used to track the ownership of a non-fungible token.

  • A developer created a new fungible token standard that can run on Bitcoin. It's mainly been used for memecoins because it's not possible to associate tokens on Bitcoin with smart contracts that can do more sophisticated things.

Of note: The seven-day moving average is on par with the best days of 2017 right now, but if the boom in transactions continues that won't last.

The bottom line: This stuff is the new hotness so it's trading like crazy, as new hot things do.

Go deeper