BTC transactions break record - here's what's behind them

The number of Bitcoin transactions has reached a new record high. This is mainly due to the current hype surrounding BRC-20 tokens.

On May 1, Bitcoin recorded more transactions in a single day than ever before. A milestone in its more than 14-year history. The number of Bitcoin transactions rose to more than 682,000 in a single day. That’s nearly 200,000 transactions higher than the previous record set during the bull market on Dec. 14 in 2017.

More than half of the transactions on May 1 were due to BTC Ordinal Inscriptions, which have become increasingly popular in recent months. In addition, transactions linked to deposits and withdrawals on crypto exchanges mainly account for the remainder of BTC transactions, according to Glassnode. But what exactly are BTC Inscriptions, what features do they enable and why are they currently driving up the number of BTC transactions?

Bitcoin Inscriptions cause a hurricane of transactions

Bitcoin orders allow sending and receiving Satoshis (the smallest units of a Bitcoin), possibly with data such as text, images, audio files or videos. Adding such data to a Satoshi is called an inscription, and its contents are stored on Bitcoin’s blockchain.

Thus, although ordinals are not "tokens" in the strict sense like NFTs or Ethereum ERC-20 tokens, they can be used for similar things and can also be traded. Moreover, ordinals are fully stored on the Bitcoin blockchain, while this is not the standard on other blockchain networks.

According to on-chain analytics platform Dune.com, more than 3.3 million Inscriptions have already been created since January, with more than 370,000 new Inscriptions on May 1 alone.

What are BRC-20 tokens?

Bitcoin BRC-20 tokens are digital assets based on the BTC blockchain and make it possible to use Ordinals to be made on the blockchain. BRC-20 is thus a technical standard that allows developers to create custom tokens on the Bitcoin Blockchain. BRC-20 tokens can be used for various purposes, such as representing digital property, tokens or even as part of a project or platform.

So basically, BRC-20 tokens are very similar in operation to ERC-20 tokens, which are based on the Ethereum blockchain. They can be stored in wallets, sent to other users and traded on crypto exchanges. However, they do not have smart contract functionality and are therefore much more limited in their function compared to ERC-20 tokens so far.

Popularity rising, but caution is needed

Bitcoin-based BRC-20 tokens currently appear to be growing in popularity. From data from Brc-20.io shows that more than 8,500 different BRC-20 tokens have already been created. Together, these tokens add up to a market capitalization of about US$119 million.

But not all tokens are really useful: Many are not very reputable and have low market liquidity. That means they often have no real use case, are suspected of fraud or are difficult to sell. Therefore, it is advisable to do thorough research before investing in BRC-20 tokens. The new token standard is still in its infancy. Although it is possible that some tokens have great potential. However, it is equally likely that the vast majority of them will eventually fall to zero.