- On May 1, 60% of all transactions on Bitcoin used Taproot, an all-time high.
- The Bitcoin network also recorded $3.5 million in transaction fees, marking a 2-year high.
The 2o23 bull market has led to a sharp spike in network activity on Bitcoin [BTC] chain. The number of daily transactions and unique active addresses has grown steadily over the past four months.
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Blockchain analytics company CryptoQuant devised a Bitcoin Network Activity Index to capture the fast-growing activity in the chain. The index takes into account key indicators such as transactions, addresses and demand for block space.
Interestingly, the main reason behind the surge in network traffic was transactions driven by Taproot addresses, as underlined by Ki Young Ju, CEO of CryptoQuant.
Source: CryptoQuant
Bitcoin reinvents itself
Until 2023, Bitcoin’s reputation was limited to being a peer-to-peer (P2P) payment network with not much practical use beyond handling on-chain transactions.
However, with the Taproot upgrade, Bitcoin began to position itself like other conventional layer-1 blockchains, enabling on-chain smart contract deployment and minting of Ordinals NFTs.
That says a data scientist from an analysis agency Glasnode, Taproot transactions accounted for more than 37% of output spent on the Bitcoin network. The demand for Taproot was also reflected in the adoption and usage metrics.
The data showed that on May 1, 60% of all transactions on Bitcoin were using Taproot, marking an all-time high.
Source: Glassnode
Another notable trend worthy of note was the growing dominance of text inscriptions over image inscriptions when it came to Taproot transactions. In fact, text inscriptions accounted for more than 50% of all transactions on the Bitcoin network.
Taproot was an upgrade to improve Bitcoin’s privacy, scalability, and security. It introduced new signature schemes and a flexible transaction structure to make transactions more efficient and less expensive.
Miners are raking in the moolah
Due to the increase in network traffic, miners managed to collect huge transaction fees. Users were willing to spend more to have their transactions validated quickly. On May 3, the Bitcoin network recorded $3.5 million in transaction fees, a record in 2 years.
Source: Glassnode
On Expected Lines, Ordinals accounted for a significant portion of total fees paid to miners, averaging nearly 21% over the past week, data from a Dune dashboard showed.
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The crypto community has a divided view on Ordinals, and the idea of smart contracts on Bitcoin in general. The naysayers object to the non-financial use case that would overload the network and drive up costs in the chain.
At the time of writing, BTC traded hands at USD 29,240, a marginal increase of 0.37% over the past 24 hours, according to CoinMarketCap.
