Current Development Status of Bitcoin NFTs: Total Accumulation Exceeds 320,000, Trading Heat Continues to Rise

Although Bitcoin chain NFTs have only emerged for about a month and a half, they are already seen as a market with great potential. Research institutions predict that the market size for Bitcoin NFTs will reach $4.5 billion by 2025, with a trading volume of $1.6 billion. In addition, the development of Bitcoin NFTs may also promote the overall development of the Bitcoin ecosystem, increase network utilization, and benefit miners' earnings.

If we take the release date of version 0.4.0 of the Ordinals protocol (which officially introduced NFTs to the Bitcoin network) on January 21, 2023, as the starting observation point, it has been about one and a half months since then. What is the current state of Bitcoin Ordinals NFTs during this early development phase?

Based on the on-chain data of Bitcoin (from January 21 to March 7) and the trading data of Ordinals NFT, the current situation regarding NFT types, trading scale, user scale, mining changes, and network fundamentals is as follows:

1. A total of 328,800 Ordinals NFTs have been generated on Bitcoin, with an average of 7,148 new ones added daily. Among them, there are 208,800 images and 117,400 texts. Recently, the growth of text NFTs has been particularly significant.

2. The cumulative trading volume of the four major trading markets from February 15 to March 7 is approximately $6.99 million, and the total number of independent addresses has surpassed 10,000.

3. OrdinalsNFT is becoming a major factor in increasing miners' transaction fee income and may become a primary source of income in the future. The transaction fees generated by NFTs grew from 0.00066 BTC in a single day to 0.28428 BTC, an increase of approximately 43257.73%, equivalent to 433 times. In mid-February, the proportion of Bitcoin NFT transaction fees once exceeded 21%, remaining above 15% for several consecutive days.

4. During the statistical period, the average transaction fee for every 10,000 Bitcoin NFTs accounted for 12.47% of the total fee income for miners. The growth in the number of Bitcoin NFTs will significantly impact miner income.

5. During the statistical period, the average block weight of Bitcoin accounted for approximately 87.78% of the total capacity. Currently, the Bitcoin Ordinals NFT activity has not squeezed out other trading activities, but has only consumed the originally available space. This is also the reason why the average transaction fee per byte has not increased.

The total number of NFTs has exceeded 320,000, with images and text being the two main types.

From January 21 to March 7, a total of 328,800 OrdinalsNFTs were generated on Bitcoin, with an average of 7,148 new ones added daily. Looking at the daily generation count, Bitcoin OrdinalsNFTs experienced two peaks. The first peak occurred in mid-February, where the daily generation counts on February 9, 14, and 15 all exceeded 15,000, and this peak was likely influenced by the release of Bitcoin Punks. The second peak occurred in early March, where the daily generation counts from February 28 to March 5 all exceeded 15,000, with the highest count on March 1 reaching 24,800, which was likely influenced by news of a well-known NFT project issuing Bitcoin NFTs.

Overall, the development of Bitcoin Ordinals NFT is greatly influenced by the "migration" of well-known Ethereum NFT projects or teams, with significant fluctuations in daily generation volume, which aligns with the basic characteristics of the early market.

Currently, the types of Bitcoin Ordinals NFT mainly include four categories: images, text, video, and audio. In terms of total quantity, the type with the highest cumulative total is image NFT, with a total of 208,800, followed by text NFT, with a total of 117,400. Video and audio NFTs are less common, with both being fewer than 500. In terms of average daily generation, the most generated image NFTs averaged 4,540 per day during the observation period, text NFTs averaged 2,551 per day, and video and audio NFTs averaged less than 15 per day.

This type of distribution is related to the generation method of Bitcoin Ordinals NFTs. Bitcoin NFTs (i.e., inscription data) are completely on-chain and are part of the witness data, "bound" to a single satoshi. Therefore, the size of the NFT is constrained by the size of the Bitcoin block space, and smaller images and text NFTs have certain advantages.

From the generation trend of various types of Bitcoin Ordinals NFTs, both image and text NFTs show a significant growth trend, especially text NFTs, which have a more pronounced growth trend, increasing rapidly in recent times. In contrast, video NFTs are on a decline, while audio NFTs remain relatively stable.

Recently, the total trading volume exceeded 6.99 million USD, and the number of unique addresses participating in the transactions has surpassed 10,000.

At this stage, the main value of NFTs is still reflected in the secondary market. Currently, there are four main trading markets for Bitcoin Ordinals NFTs. From February 15 to March 7, the cumulative trading volume of the four major markets was approximately $6.99 million, with the highest trading volume market being around $4.28 million, followed by approximately $1.66 million, and the third place also nearly reaching $1 million. Overall, the total trading scale of these trading markets is still at the million-dollar level.

From the perspective of the daily trading total of the four major markets, the average daily total is approximately $333,000. The increase in trading volume began after February 28, when the trading volume on the 28th reached $1.74 million, and thereafter, it has generally remained around $500,000 per day, significantly higher than the previous daily level of around $100,000. The growth trend of daily trading total is very obvious.

In terms of user scale, the cumulative number of unique addresses in the four major markets during the same period was approximately 58,500, of which the platform with the highest number of unique addresses reached 30,800, followed by approximately 15,600 and 12,000.

From the changes in the cumulative number of independent addresses across the four major markets, the total number of daily independent addresses has shown significant growth, but the growth rate has slowed recently. On March 7, the total number of independent addresses surpassed 10,000, an increase of 211.75% compared to 3,209 at the beginning of this month, and a breakthrough from 0 to 1 compared to 7 on February 15.

Daily contribution of NFT transaction fees exceeds 6%, and the transaction fee per byte is currently showing a downward trend.

The rapid development of Bitcoin Ordinals NFT has brought some noticeable changes to the underlying network. Firstly, the most intuitive change is that the adoption rate of Taptoor has significantly risen.

According to the classification of a certain data platform, the type of balance used by Bitcoin, which can be understood as transaction types, can be divided into 8 categories. Among them, P2TR refers to Pay to Taproot, which means using Taproot transactions. The proportion of this transaction type has shown a significant rise trend after January 21, increasing from 1.79% to 6.22%, with a peak close to 10%. Recently, it has basically remained above 5%.

Additionally, the two intuitive changes in the chain are the rise in transaction numbers and the increase in daily average computing power. The production and transfer of NFTs are reflected as on-chain transactions, and the increase in transaction demand will naturally affect the changes in computing power.

According to statistics, the growth in the number of transactions has been relatively moderate, increasing from 287,700 transactions per day to 315,900 transactions per day during the statistical period, a rise of approximately 9.79%. The highest number of transactions in a single day during this period was about 381,800, while the lowest was around 240,200, showing that the overall fluctuation is not severe. The increase in the average computing power per day has also been quite moderate, rising from 259.0 EH/s to 279.3 EH/s during the statistical period, which is an increase of about 7.81%, remaining at historically high levels. The highest average computing power in a single day during this period was about 361.6 EH/s, while the lowest was approximately 222.6 EH/s, with more noticeable fluctuations recently.

The development of Bitcoin Ordinals NFT has opened new space for the application of Bitcoin, and the rise in network usage has driven an increase in miner income. The total daily fee income for miners grew from 16.33 BTC to 24.03 BTC during the statistical period, with a rise of 47.15%, which is quite significant. Among them, the fees generated by NFTs increased from a daily 0.00066 BTC to 0.28428 BTC, with a rise of approximately 43257.73%, which is equivalent to a 433-fold increase.

Recently, the growth momentum of Bitcoin's daily total transaction fees primarily comes from OrdinalsNFT. The correlation between the two is statistically significant, meaning that the more transaction fees generated by OrdinalsNFT, the higher the total transaction fees for the day, benefiting miners from the OrdinalsNFT activities.

From the perspective of the proportion of OrdinalsNFT transaction fees to the total transaction fees of the day, the average value during the statistical period is approximately 6.61%, meaning that nearly 7% of miners' income comes from NFT activities. However, this is just the daily average, significantly influenced by the relatively few early NFT activities. If we narrow the observation time frame to February, nearly 9% of miners' income comes from NFT activities.

It is worth noting that in mid-February, the transaction fee ratio of Bitcoin NFTs once exceeded 21%, remaining above 15% for several consecutive days. NFTs may become an important source of income for miners in the future. Additionally, looking at the daily production of Bitcoin NFTs, during the statistical period from January 21 to March 7, an average of 2.36 BTC in fees was generated for every 10,000 NFTs, with the average daily total fee during the same period being approximately 18.95 BTC, meaning that an average of 12.47% of miners' fee income came from every 10,000 NFTs. This indicates that the growth in the number of Bitcoin NFTs will significantly impact miners' income.

However, in the current situation, this impact has not yet been reflected. On the contrary, the recent average transaction fee per byte (the minimum unit of block space) on the Bitcoin network has shown a downward trend, decreasing from 0.0023 BTC on January 21 to 0.0013 BTC on March 5, a drop of about 41.52%. Furthermore, the fluctuations in the recent average transaction fee per byte have also been quite large, reaching as high as 0.0031 BTC and as low as 0.00099 BTC.

This is related to the block space size used by Bitcoin Ordinals NFT. Despite the recent impact of NFT activities, the average block capacity of Bitcoin shows a significant rise trend, increasing from 2.94 MB on January 21 to 3.74 MB on March 5, a rise of approximately 26.94%. Since February, the average block weight has basically remained around 3.8 MB.

However, there is still some space from the maximum weight of 4 MB allowed by SegWit and Taroot. According to statistics, from January 21 to March 5, the average block weight of Bitcoin accounted for about 87.78% of the total capacity, which is less than 90%, with a maximum of no more than 95.5%. This means that the current Bitcoin Ordinals NFT activity is still within the network's capacity and has not squeezed out other transaction activities; it has merely consumed the already available space.

But this is only the early stage of Bitcoin NFT. With the prosperity and development of NFTs, there may be more complex effects on the fundamentals of the Bitcoin blockchain in the future, especially in terms of mining fundamentals. In particular, centralized minting of NFTs may exacerbate short-term fluctuations in Bitcoin transaction fees, while under normal circumstances, NFT activities may improve the long-term utilization of block space. This could spur the development of Bitcoin's second-layer network and other facilities such as user-friendly wallets.