Bitcoin Ordinals: Determinants and Impact on Total Transaction Fees

Abstract

Bitcoin Ordinals are on-chain non-fungible assets native to the Bitcoin blockchain. As the data is stored on-chain, by opposition to Ethereum-like NFTs, creating an ordinal (i.e. "inscribing" it) can be expensive. We analyze the initial wave of Ordinals from December 14th 2022 until April 16th 2023. We show that ordinal inscriptions tend to have a lower fee rate than regular transactions. We also show that a high average block transaction fee rate is associated with lower ordinal inscriptions. These effects are larger for large inscriptions. This suggests that ordinal users are careful when setting the fee rate of their inscriptions. We also show that both the transaction fee rate for non-inscription transactions and total block fees have increased with the popularity of Bitcoin Ordinals, increasing miners' revenue.

Keywords: Bitcoin, Blockchain, Ordinal, Non Fungible assets, Transaction fees

JEL Classification: D23, G29, L14