The Impact of BTC Ordinals on Bitcoin Mining

The year 2023 has indeed seen immense growth within the bitcoin landscape. Since the early days of the year, a new advancement called Ordinals was introduced on bitcoin, attracting thousands of investors. Ordinals system was made possible owing to flaws noticed in bitcoin’s taproot upgrade, which was implemented in late 2022. 

Ordinals involve writing inscriptions on top of bitcoin’s smallest units called satoshis. The fact that this technology is based on bitcoin caused immediate hype, with thousands of investors already looking into those assets. 

The emergence of the Ordinals system allowed bitcoin to host NFTs and tokens. Both ordinals NFT and BRC-20 tokens have gained immense popularity. Despite the technologies indicating a good growth direction for bitcoin, even creating more use cases for BTC, this Ordinals system has impacted the mining sector vastly. How? This guide explores how the new ordinals system affected bitcoin mining. 



Complexity Discourages Small Miners 


One of the biggest and most notable impacts of BTC Ordinals is the bolstering of Block size. Let’s explore this quite a bit.

The Ordinals software, as mentioned earlier, came as a system allowing people to write inscriptions directly on the blockchain. This system is lightly distinguished from the average way of writing NFTs on other chains like Ethereum, which leverages info from other off-chain data centers in a decentralized manner. 

Hosted on the blockchain directly, bitcoin NFTs became a challenge when taking storage. The data take up massive space within each of the average bitcoin blocks. 

Historically, bitcoin’s most standard block size has remained at an average of about 1MB. There were discussions and even a vote to increase the block size to fit more transactions, but the conclusion was a creation of a bitcoin fork called bitcoin Cash. 

Other blockchain analysts have noted that, on average, the block size in bitcoin ranges between 1 and 2MB. However, there have been notable cases where the maximum size has been theoretically said to be capable of heightening to 4MB.

Glassnode data indicated that since the inception of Ordinals, bitcoin’s block size has almost doubled. The data showed that it moved from a lower side of about 1.5-2MB range to a higher of 3.0 -3.5MB.

Furthermore, reports note that Inscriptions 652 was part of a significant block transaction of 4MB in the early days of Ordinals.

The rise of Ordinals inscriptions has brought a new challenge for the bitcoin network. bitcoin now faces congestion as block sizes seem to go to the extreme. How does this affect miners?

Reports suggest that any minor changes in block size affect the miners. For instance, when speaking about the subject, they mentioned that the larger block sizes would negatively affect small miners. Only large mining networks have enough power to deal with supermassive block sizes.



Complexities Causing Miner Centralization and Endangering BTC


As already established in the point above, the recent emergence of ordinals causes congestion on bitcoin, possibly leading to larger blocks. This discourages smaller miners from taking into mining. 

This turns the mining business into a job only a few top companies can participate in. Larger companies often control considerable computation powers. Owing to the difficulty, smaller miners join the larger pools, effectively making the entirety of mining a centralized affair. Why is this bad?

The centralization of miners means that the Bitcoin network can be easily attacked through mining. Consider 51% attacks. If miners accumulate over 50% of the mining hash power, they can easily carry out this attack, benefiting themselves.



Miners Benefit as Fee Heightens


Another possible impact of the Ordinals of bitcoin miners is increased incomes in the form of fees. Here this out. 

Since the early days of bitcoin Ordinals, one thing was clear, the number of transactions was effectively surging. The numbers have caused massive congestion in the network leading to calls for increased block sizes. However, the enormous impact of Bitcoin Ordinals is the fee surge

Bitcoin network fees surged to a high of $30 in early May due to severe congestion on the network. The fees increase since the number of transactions is too high that investors must pay more to make miners prioritize their transactions. 

Miners in the Bitcoin network have earned vastly in recent weeks. Several representatives of mining companies have been heard noting that the recent fee hikes have been quite profitable. Aside from the incomes of mining companies rising, the value of mining company stocks also surged.

Other reports indicate that Bitcoin’s transaction fees surged to way higher than miners’ fees for the first time in years. 

Therefore, the recent emergence of bitcoin ordinals brought more profits for miners, making the entire business highly lucrative.



Final Word


This guide has explored the world of BTC ordinals and how these new technologies impact miners. As established, the most significant benefit to miners is increased fees, leading to more profits. As such, this encourages miners to continue participating in the network. 

However, the bigger picture is that the ordinals increase the block size, causing mining to be more complex hence a discouragement to smaller players. In the end, bitcoin mining becomes a centralized affair.